Flint Company borrowed $46,800 on November 1, 2020, by signing a $46,800, 9%, 3-month note. Prepare Flint's November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, entry.

The journal entry on November 1, 2020:

Debit Cash $46,800

Credit Notes Payable $46,800

The journal entry on December 31, 2020:

Debit Interest expense $351

Credit Interest Payable $351

The journal entry on February 1, 2021:

Debit Interest Payable $351

Debit Interest expense $702

Debit Notes Payable $46,800

Credit Cash $47,853

Explanation:

The amount of interest Flint Company has to pay = ($46,800 x 9%/12) x3 = $1,053

The amount of interest Flint Company has to pay per month = $1,053/3 = $351

The journal entry on November 1, 2020:

Debit Cash $46,800

Credit Notes Payable $46,800

The journal entry on December 31, 2020:

Debit Interest expense $351

Credit Interest Payable $351

The journal entry on February 1, 2021:

Flint pays the principal and interest owed on the note. The entry by Flint for the payment (maturity) of the note plus interest:

Debit Interest Payable $351

Debit Interest expense $702

Debit Notes Payable $46,800

Credit Cash $47,853