Long-term Note Payable:Maturity

Brian Krogol
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Alright. So you're gonna see this is very similar to paying back a short term note because we still have to pay back any accrued interest which we're usually gonna have some interest accrued in that final year leading up to the final maturity date and principal repayment. So let's go ahead and dive into the problem here because we're here we're still going to repay the principal and repay any interest that hasn't been paid yet On october 1st year one the goods company signed $100,000.12 percent 10 year note. Maturing on october 1st year 11 interest is payable annually on october 1st prepare the entry to repay the note payable. So now we're paying the whole principal and all accrued interest on october 1st year 11. So now we're talking about that final year right? So every year has passed and we've been making interest payments right? We've been making those entries like we did above for the the interest payable interest expense and paying cash right? And now it's finally the final year and we're gonna do those same entries for the interest but we're also going to repay the principal of the loan. So just like before we're going to have our interest um Interest payable like we did with the short term note, we would have still accrued if you think about it in year at the end of year 10 October and November and December of year 10 after our previous interest payment right? We made an interest payment on October 1st year 10 we had made an interest payment and now one more year is passing where we're accruing interest. So we would have made that adjusting entry to accrue for those $3,000 of interest. And then we would have to in year 11 take the remaining interest expense. So just like we did above the interest expense in year 11. So I'm just showing you here right, we have this this liability already for 3000 on our books from year 10 And that's October through December of year 10. Well now we're talking about the interest expense for year 11 and that's gonna be just like above those nine months, january february March april may june july august september nine months of interest in year 11. Before we pay everything back on october 1st year 11. Okay. So we've got the 100,000 that we borrowed times the 12% 0.12 times nine twelve's right for the nine months in year 11. And that's gonna equal 9000. Right? We Owe 9000 and interest expense from year 11. So this is gonna be it right. We've got to get rid of the interest payable that we still, oh we gotta get rid of the interest. We gotta pay the interest expense that we incurred this year. And we got to repay the note payable the principal the 100,000. Cool. Let's go ahead and make this journal entry first. We gotta get rid of the note payable because we're gonna pay them back the principal amount. So we're gonna put that with a debit, right? We're going to debit note payable to get that off of our books. We had that liability previously and we are paying it back. Cool. So now the note payable is off of our books with a debit. The interest payable. This 3000 from from the end of year 10. What? We got to pay that back now as well? What? So we gotta get rid of that liability with a debit as well interest payable. And that's gonna be the 3000 related to the end of year 10. And then we've got interest expense For those nine months that have happened in year 11, right? That we just calculated. So that's everything we have to pay back. Right? We have to pay back the note payable. The principle we have to pay back any accrued interest, which is this full year's worth of interest right here, 3000 from last year, october through december 9000 from this year, january through september leading up to october 1st. Cool. So we're gonna pay all of that back with cash. We're going to credit cash for the total amount of everything we're paying 112,000. That comes out to 112,000 that we pay back. Cool. And that makes sense. Right? We've got the 100,000 which was the the principal amount. And then the 12,000 which is a year's worth of interest 100,000 times 12%. Well, that's a year's worth of interest. And that's how much since the last interest payment. Cool. Alright. So that's how we deal with notes payable. Let's go ahead and move on to the next topic.