Answer:
cash 20,000 debit
note payable 20,000
--to record sign of the note--
interest expense 2,000 debit
interest payable 2,000 credit
--to record accrued interest--
interest expense 2,000 debit
interest payable 2,000 credit
--to record accrued interest--
note payable 20,000 debit
interest expense 2,000 debit
interest payable 4,000 debit
cash 26,000 credit
--to record maturity of the note--
Explanation:
principal x rate x time = interest
20,000 x 10% x 1 year = 2,000 interest expense per year
At maturity we have to pay principal and all accrued interest for the three 3-year period.
te previous two year are payable and the current interest expense
The total cash outlay will be 20,000 principal + 2,000 x 3 = 6,000 cash on interest.
