Notes Payable

Essential Company, which manufactures steel tubing and casing for automobile production, borrowed $432,000 on January 1 to finance the purchase of a new piece of machinery with new heating technology. The terms of Essentials note dictate that it is a 8-month, 10%, interest-bearing note.

Required:

1. Record the borrowing transaction. If an amount box does not require an entry, leave it blank.

Jan. 1	Accounts ReceivableCashMachineryNotes PayableNotes ReceivableCash	Cash	Cash
	Accounts PayableAccounts ReceivableCashNotes PayableNotes ReceivableNotes Payable	Notes Payable	Notes Payable
	(Record issuance of note payable)

Feedback

1. On the date of the borrowing transaction, the company receives the money from the bank and has an obligation to pay the money back with interest in the future.

2. Record the repayment transaction. If an amount box does not require an entry, leave it blank.

Sept. 1	Accounts PayableAccounts ReceivableCashNotes PayableNotes ReceivableNotes Payable	Notes Payable	Notes Payable
	Accounts PayableCashInterest ExpenseInterest PayableInterest ReceivableInterest Expense	Interest Expense	Interest Expense
	Accounts ReceivableCashInterest ExpenseInterest ReceivableNotes PayableCash	Cash	Cash
	(Record payment of interest and principal)