Absolutely, let's proceed step-by-step to solve this question.
### Req 1: Compute the accrued interest payable on December 31.
Given:
- Principal (P) = \[tex]$400,000
- Annual interest rate (R) = 12% or 0.12
- Duration of the note = 90 days
- Days from November 7 to December 31 = 54 days (accrual period)
Use the formula for simple interest:
\[ \text{Interest} = \frac{P \times R \times T}{360} \]
#### Total interest for the 90-day note:
\[ \text{Total interest} = \frac{400,000 \times 0.12 \times 90}{360} = \$[/tex]12,000 \]
#### Accrued interest up to December 31:
[tex]\[ \text{Accrued interest} = \frac{400,000 \times 0.12 \times 54}{360} = \$7,200 \][/tex]
### Req 2 & 3: Prepare the journal entries
#### 2. Journal entry for accrued interest expense at December 31:
On December 31, Mura Company needs to record the interest expense incurred but not yet paid. The journal entry for this would be:
```
December 31:
Debit Interest Expense = \[tex]$7,200
Credit Interest Payable = \$[/tex]7,200
```
#### 3. Journal entry for payment of the note at maturity on February 5:
On February 5, Mura Company will pay both the principal and the total interest for the note. The total interest minus the accrued interest recognized up to December 31 will be:
[tex]\[ \text{February 5 interest expense} = \$12,000 - \$7,200 = \$4,800 \][/tex]
The journal entry would be:
```
February 5:
Debit Interest Expense = \[tex]$4,800
Debit Note Payable = \$[/tex]400,000
Credit Cash = \[tex]$404,800
```
### Summary
#### Compute the accrued interest payable on December 31:
\[ \text{Accrued interest} = \$[/tex]7,200 \]
#### Journal Entries:
December 31:
[tex]\[
\begin{aligned}
&\text{Debit Interest Expense} = \$7,200 \\
&\text{Credit Interest Payable} = \$7,200 \\
\end{aligned}
\][/tex]
February 5:
[tex]\[
\begin{aligned}
&\text{Debit Interest Expense} = \$4,800 \\
&\text{Debit Note Payable} = \$400,000 \\
&\text{Credit Cash} = \$404,800 \\
\end{aligned}
\][/tex]
