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.)

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.