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6 October, 21:35

1. Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30

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  1. 6 October, 21:59
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    Debit interest expenses for $15,000

    Credit interest payable for $15,000

    Explanation:

    Since January 1 to June 30 is 6 months, we need to calculate interest expenses for the 6 months as follows:

    Monthly interest expenses = ($500,000 * 6%) / 12 = $2,500

    Interest expenses for 6 months = $2,500 * 6 = $15,000

    The adjusting entry required will therefore look as follws:

    Date Particulars Dr ($) Cr ($)

    June 30 Interest expenses 15,000

    Interest payable 15,000

    (To record 6 months interest payable on note.)
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