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29 April, 12:17

On September 1, Joe's Painting Service borrows $150,000 from National Bank on a 4-month, $150,000, 6% note. What entry must Joe's Painting Service make on December 31 before financial statements are prepared?

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  1. 29 April, 12:27
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    Loan Account

    DR loan Note Account with $150,000

    DR Loan Interest Expenses with $3,000

    CR Cash/Bank Account with $153,000

    Explanation:

    the interest payable on the loan as at Dec 31 = $150,000 * 6% * 4/12 = $3,000
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