On november 1, 2018, new morning bakery signed a $203,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on may 1, 2019. new morning bakery records the appropriate adjusting entry for the note on december 31, 2018. what amount of cash will be needed to pay back the note payable plus any accrued interest on may 1, 2019? (do not round your intermediate calculations.)

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Zviko Zviko · Answer 1 · 2020-03-28T01:55:34+01:00

Answer:

Thus the amount of cash will be needed to pay back the note payable plus any accrued interest on may 1, 2019 is $ 215,180

Explanation:

The note accrues an interest charge at a rate of 6% over 6 months

The Journal entries to reflect the note issued, accured interest and the amount to be repaid is as follows:

Journal 1 - On Issue of Note (November 1, 2018)

Bank $ 203,000 (debit)

Note Payable $ 203,000 (credit)

Journal 2 - Interest Accrues (May 1, 2019)

Interest Expense $ 12,180 (debit)

Note Payable $ 12,180 (credit)

Thus the amount of cash will be needed to pay back the note payable plus any accrued interest on may 1, 2019 is $ 203,000 + $ 12,180 = $ 215,180