Perfect Systems borrows $160,000 cash on May 15, 2011, by signing a 60-day, 6% note. 1. On what date does this note mature?

Perfect Systems borrows $160,000 cash on May 15, 2011, by signing a 60-day, 6% note.   

1.	On what date does this note mature?
	July 14, 2011

  

2.	Assume the face value of the note equals $160,000, the principal of the loan.

  

(a)	Prepare the journal entries to record issuance of the note. (Omit the "$" sign in your response)

  

Date		General Journal	Debit	Credit
May	15	Cash
		Notes payable

  

(b)	Prepare the journal entries to record payment of the note at maturity. (Use 360 days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response)

  

Date	General Journal	Debit	Credit
July 14	Interest expense
	Notes payable
	Cash

Explanation: 1.

Maturity date = May 15 + 60 days = July 14, 2011.

 
2

Calculation of Interest Expense

Principal	$	160,000
× Interest rate		6	%
× Fraction of year		60/360
Total interest	$	1,600