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24 July, 05:15

Sweet Company borrowed $34,800 on November 1, 2020, by signing a $34,800, 9%, 3-month note. Prepare Sweet's November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, entry

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  1. 24 July, 05:20
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    The journal entries are shown below:

    On November 1

    Cash A/c Dr $34,800

    To Notes payable A/c $34,800

    (Being issuance of the note payable is recorded)

    On December 31

    Interest expense A/c Dr $522

    To Interest payable A/c $522

    (Being accrued interest adjusted)

    The computation is shown below:

    Principal * rate of interest * number of months : (total number of months in a year)

    = $34,800 * 9% * (2 months : 12 months)

    = $522

    The two month is calculated from the November 1 to December 31

    On February 1

    Interest Expense A/c Dr $261

    Interest payable A/c Dr $522

    Note Payable A/c Dr $34,800

    To Cash A/c $35583

    (Being payment is recorded)

    The computation is shown below:

    Principal * rate of interest * number of months : (total number of months in a year)

    = $34,800 * 9% * (1 months : 12 months)

    = $261

    The one month is calculated from the January 1 to February 1
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