Problem
Jesse Company adjusts its accounts monthly and closes its accounts on December 31. On October 31, 2015, Jesse Company signed a note payable and borrowed $120,000 from a bank for a period of six months at an annual interest rate of 6 percent.
a. How much is the total interest expense over the life of the note? How much is the monthly interest expense? (Assume equal amounts of interest expense each month.) In the company's annual balance sheet at December 31, 2015, what is the amount of the liability to the bank?
Prepare the journal entry to record issuance of the note payable on October 31, 2015 and the adjusting entry to accrue interest on the note at December 31, 2015. Assume the company prepared a balance sheet at March 31, 2016.
State the amount of the liability to the bank at this date.