[preciousjane]

I'm having a problem solving for the adjusting entry of notes payable,
Here's the problem:

The P900,000 note payable was issued on October 1,2011. It will be paid in 12 months together with interest at an annual rate of 24%.

Actually I have the figures but I'm not sure what title entry to use and if my figures are correct. My figures are (900,000 * .24) then its answer 900,000 that will make it 1,116,000.

279,000 for 3mos
837,000 for 9mos.

Please help.. I'm really confused

[pready]

I assume you are doing an adjusting entry at the end of the accounting period, which I assume is December 31. If so you need to calculate 3 months of interest.
Since the formula is Principal times Rate times Time equals Interest, then:
P900,000 * 24% * 3/12(partial year) = P54,000

Your adjusting entry will be:
Debit Interest Expense for P54,000
Credit Interest Payable for P54,000

Now when you pay off your loan in the following year you will have to compute the remaining interest due first. So:
P900,000 * 24% * 9/12 = P162,000

Your journal entry will be:
Debit Interest Payable for P54,000
Debit Notes Payable for P900,000
Debit Interest Expense for P162,000
Credit Cash for P1,116,000

[preciousjane]

Thank you so much!