Answer:
August 1,2018
Issuance of Note
Dr. Cash $20,300,000
Cr. Note payable $20,300,000
December 31,2018
Interest Accrued
Dr. Interest Expense $507,500
Cr. Interest payable $507,500
February 1, 2019
Payment of Note
Dr. Note Payable $20,300,000
Dr. Interest Payable $507,500
DR. Interest Expense $101,500
Cr. Cash $20,909,000
Explanation:
Note Payable is promise in writing to pay a sum of money in future. The money normally consists of Principal and interest.
Principal value = $20,300,000
The interest of 5 months is accrued at December 31 and it will be recorded.
Payment of Interest and Principal is made on February 1,2019
Accrued Interest = $20,300,000 x 6% x 5/12 = $507,500
Interest Expense on maturity = $20,300,000 x 6% x 1/12 = $101,500
