Entries for notes payable Bennett Enterprises issues a $400,000, 90-day, 5% note to Spectrum Industries for merchandise inventory. Assume a 360-day year. For a compound transaction, if an amount box does not require an entry, leave it blank. a. Journalize Bennett Enterprises' entries to record: 1. the issuance of the note. 2. the payment of the note at maturity. b. Journalize Spectrum Industries' entries to record: 1. the receipt of the note. 2. the receipt of the payment of the note at maturity.

The Journal entries are as follows:

(a) 1. Cash A/c Dr. $400,000

           To notes payable      $400,000

(To record the issuance of the note)

2. Notes payable A/c Dr. $400,000

Interest payable A/c Dr. $5,000

        To cash                                      $405,000

(To record the payment of the note at maturity)

Workings:

Interest payable = Amount × Interest rate × Time period

                           = $400,000 × 5% × (90 ÷ 360)

                           = $5,000

(b) 1. Note receivable A/c Dr. $400,000

                 To cash Ac                              $400,000

(To record the receipt of the note)

2. Cash A/c Dr. $405,000

           To notes receivable        $400,000

           To Accrued interest        $5,000

(To record the receipt of the payment of the note at maturity)

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