Ask Experts Questions for FREE Help !
Ask
    Tithic's Avatar
    Tithic Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Feb 3, 2012, 09:12 PM
    Note payable and interest expense.
    Hi! I'm sort of unable to understand how to go with this. So I'll appreciate your help very much. Thanks in advance!

    We have a note payable of $30,000 due on Dec. 31, 2011. Interest on the note payable is 4 percent per year, payable monthly at the beginning of the following month. Interest was last paid on December 1, 2011 and was recorded properly at that time. The company signed the note on June 1, 2011.

    I'll have to prepare the appropriate journal entry for this.I know I would have to debit interest expense but I'm not sure if I should credit interest payable or the note payable.

    Thanks a lot once again!
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member
    		  
    #2

    Feb 4, 2012, 05:23 AM
    Although it wouldn't be completely wrong to credit the Note Payable account for the accrued interest (in which case the NP account would serve as a statement of "combined principal and interest due" balance), the more common practice is to let the NP account remain at 30K until it's paid, and credit a separate Interest Payable account for the one month of accrued interest.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Accrued interest payable for a note payable [ 2 Answers ]

Allen Corp.'s liability account balances at June 30, 2007 included a 10% note payable in the amount of $2,400,000. The note is dated October 1, 2005 and is payable in three equal annual payments of $800,000 plus interest. The first interest and principal payment was made on October 1, 2006. In...

Interest accrued on note payable [ 3 Answers ]

"Interest accrued on 6-month note payable,issued jan 1,$300" From trial balance march 31 :notes payble $10,000 ~could any one explain to me how it is incurred?

Interest on note payable [ 1 Answers ]

Jan 1.note payable RM90000 ADJUSTING ENTRIES NEEDED AT THE END OF THE MONTH, Accrued interest on note payable is calculated to RM750. My question is how to prepare a journal for this?

View more questions Search