Draper Consulting Continuing Problem P10-24: Assignment – Module 7, Week 7

Summary

Accounting entries for a note payable are shown. Students see how to record the note, accrue interest and make the payment.

Recording the note

A note payable is recorded when it is issued. This part shows how to record a $300,000 note payable on March 1, 2013.

Accruing interest on the note

Interest on the note is accrued at the end of the year. This part shows how to record the interest expense and interest payable on December 31, 2013.

Recording the payment

The note is paid on its due date. This part shows how to record the payment of the note and the interest on March 1, 2014.

Filling in the journal entries

Students need to complete the journal entries for the note payable. They must select the appropriate account names from a drop-down menu.

Key terms

note payable

a written promise to pay a certain amount of money at a future date

accrued interest

interest that has been earned but not yet paid

interest expense

the cost of borrowing money, shown as an expense in the income statement

long-term notes payable

notes that are due more than one year from the date of the balance sheet

current portion of long-term notes payable

the amount of a long-term note that is due within the next year

journal entries

records of financial transactions in the accounting journal

Questions this document helps with

• What is a note payable and how is it recorded?
• How is interest accrued on a note payable?
• What journal entries are made when a note payable is paid?

Summary written with AI from the document's text.