To journalize the payment of a six-month, 6% note for $15,000 at maturity, including the interest, you first need to calculate the interest on the note.
Step 1: Calculate the interest.
The formula for calculating interest is: \[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \]
- Principal = $15,000
- Rate = 6% (or 0.06)
- Time = 6 months (or 0.5 years)
\[ \text{Interest} = 15,000 \times 0.06 \times 0.5 = 15,000 \times 0.03 = 450 \]
Step 2: Total payment at maturity.
Total payment includes the principal plus interest: \[ \text{Total Payment} = \text{Principal} + \text{Interest} = 15,000 + 450 = 15,450 \]
Step 3: Journal entry.
When the note is paid at maturity, you will make the following journal entry:
Date: [Date of payment]
| Account Title | Debit | Credit | |-------------------------------|------------|------------| | Notes Payable | 15,000 | | | Interest Expense | 450 | | | Cash | | 15,450 |
Explanation:
- Debit "Notes Payable" to remove the liability from the books.
- Debit "Interest Expense" to record the interest cost incurred.
- Credit "Cash" to reflect the cash outflow for the total payment made.
This entry accurately reflects the payment of the note and the interest due at maturity.