Answer
Step1:
Interest due on maturity 400 dollars
Rate of Interest 8%
Period of Note payable - 4 months
400 = Amount x 8% x (4/12)
Amount = 15,000 dollars
Step2:
Amount = 18,500 dollars
Interest = 555 dollars
Period = 4 months
555 = 18,500 x Interest rate x 4 months
Interest rate = 9%
Step3:
May 15 Cash 15,000 dollars
Notes payable 15,000 dollars (a)
Sept. 15 Notes payable 15,000 dollars
Interest expenses 400 dollars
Cash 15,400 dollars (b)
Work Step by Step
Interest = Amount x Interest rate X period in years
Step2:
Interest = Amount x Interest ratex period in years
Step3:
a)To record the issue of Notes payable for 4 months
b)To record the repayment of Notes payable along with the interest due
