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Jones Corporation purchased merchandise inventory with a 10%, 120-day note payable for $10,000. The company uses the perpetual inventory system.
What is the journal entry to record payment of the note on the due date? (Round interest to the nearest dollar and assume a 360-day year.)

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Answer:

                                                      Debit                      Credit

Note payable                                $10,333.33

*(10,000+10,000*10%*120/360)

Cash                                                                               $10,333.33      

Explanation:

The following journal entry shall be recorded in the accounts of the Jones Corporation on the payment of note payable on due date:

                                                      Debit                      Credit

Note payable                                $10,333.33

*(10,000+10,000*10%*120/360)

Cash                                                                               $10,333.33      

* The interest rate of 10% is for 360 days but since the payment is made after 120 days, therefore it has been accordingly apportioned for 120 days.

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