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    KAT4's Avatar
    KAT4 Posts: 6, Reputation: 1
    New Member
     
    #1

    Feb 7, 2007, 05:54 PM
    Journal Entry
    Can someone please help me with this journal entry:

    Borrowed $15,000 from the bank by issuing a 12-month note. Interest accrues on the note at the rate of 12% annually, or 1% per month. Interest is to be paid when the note is due next year.
    KongTheKonqueror's Avatar
    KongTheKonqueror Posts: 75, Reputation: 13
    Junior Member
     
    #2

    Feb 7, 2007, 07:41 PM
    When receiving cash:
    Dr. Cash 15,000
    Cr. Notes payable 15,000

    Each month to record the interest expense:
    Dr. Interest expense 150
    Cr. Interest payable 150

    When paying back the note:
    Dr. Notes payable 15000
    Dr. Interest payable 1800
    Cr. Cash 16800
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
    Ultra Member
     
    #3

    Feb 8, 2007, 10:00 PM
    I agree with Kong.

    Unless you are preparing monthly financial statements, no need to calculate the interest every month though, just when it is time for payment or a financial statement is being released.

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