Question

Bonita Company borrowed $43,200 on November 1, 2020, by signing a $43,200, 9%, 3-month note.

Required:
Prepare Bonita’s November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, entry.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On Nov 1

Cash $43,200

To Note payable $43,200

(Being the borrowed amount is recorded)

On Dec 31

Interest expense ($43,200 × 9%× 2 ÷ 12) $648

To Interest payable $648

(Being the interest expense is recorded)

On Feb 01

Interest expense ($43,200 × 9%× 1 ÷ 12) $324

Interest payable $648

Note payable $43,200

To Cash $44,172

(Being cash paid is recorded)