Moss County Bank agrees to lend the Crane Company $515000 on January 1. Crane Company signs a $515000, 6%, 9-month note. What entry will Crane Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? A-

Notes Payable515000
Interest Payable23175
Cash 538175
B-

Interest Payable15450
Notes Payable515000
Interest Expense7725
Cash 538175
C-

Notes Payable538175
Cash 538175
D-

Interest Expense23175
Notes Payable515000
Cash 538175

Crane Company

The entry that Crane Company will make to pay off the note and interest at maturity assuming that interest has been accrued to September 30 is:

D-

Interest Expense 23,175

Notes Payable 515,000

Cash 538,175

Explanation:

a) Data and Calculations:

Notes payable = $515,000

Interest rate = 6% per annum

Interest expense for nine months = $23,175 ($515,000 * 6% * 9/12)

b) Interest Expense and Notes Payable will be debited with $23,175 and $515,000 while the Cash Account will be credited with $538,185.  The cash account entry pays off the note payable with interest for nine months.

c

explanation:

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