On June 1, 20x1, ABC Corp. invested $250,000 into a certificate of deposit for 9-months, earning 9% APR. Principal and interest will be received at maturity on March 1, 20x2. ABC's year end is December 31st. At year end, the appropriate adjusting journal entry was recorded to accrue interest. To record the appropriate journal entry at maturity on March 1, 20x2 for receipt of principal plus interest at maturity, ABC would:

Question

Business

Montana

11 April, 03:56

On June 1, 20x1, ABC Corp. invested $250,000 into a certificate of deposit for 9-months, earning 9% APR. Principal and interest will be received at maturity on March 1, 20x2. ABC's year end is December 31st. At year end, the appropriate adjusting journal entry was recorded to accrue interest. To record the appropriate journal entry at maturity on March 1, 20x2 for receipt of principal plus interest at maturity, ABC would:

+2

Answers (1)

Know the Answer?

Trent Carpenter · Answer 1

note payable 250,000

interest payable 13,125

interest expense 3,750

cash 266,875

to record payment of note at maturirty

Explanation:

June 20X1

250,000 at 9% annual rate

At december 31th the company accrued the interest from June 1st to December 31th

That is 7 months.

250,000 x 9% x 7/12 = 13,125 accrued interest for the year ended X1

Then, on March 1st The company accrued the remaining two months.

250,000 x 0.09 x 2/12 = 3,750

The company will record on March 1st:

The write-off of the principal

The payment of the accrued interest for the previous year

The accrued interest for the period

the cash disbursement to settle all these obligation:

note payable 250,000

interest payable 13,125

interest expense 3,750

cash 266,875

to record payment of note at maturirty