Answer:
interest expense 2,000
interest payable 1,000
note payable 100,000
cash 103,000
Explanation:
We will check the accrued interest at year-end:
notice the rate is annual so we convert for the mont we need in each case:
Nov 1st to Dec 31th = 2 months
0.06 x 2/12 = 0.01
100,000 x 1% = 1,000 interest payable accrued at december 31th
Then we calculate from Jan 1st to May 1st = 4 months
0.06 x 4/12 = 0.02
100,000 x 2% = 2,000 interest expense for the year 2013
entry would be the payment of this two interest, plus the principal
100,000 + 1,000 + 2,000 = 103,000
interest expense 2,000
interest payable 1,000
note payable 100,000
cash 103,000
