Pearl Company borrowed $28,800 on November 1, 2017, by signing a $28,800, 8%, 3-

Question

Pearl Company borrowed $28,800 on November 1, 2017, by signing a $28,800, 8%, 3-month note. Prepare Pearl’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

2/1/18

Date

Account Titles and Explanation

Debit

Credit

2/1/18

Explanation / Answer

At december 31, we will book adjusting entry for 2 months interest expenses.

Nov-01 Cash $ 28,800 Note payable $ 28,800 (To record borrowings) Dec-31 Interest expenses ($28,800*8%*2/12) $        384 Interest payable $        384 (To record interest accrued for the year) Feb-01 Interest expenses ($28,800*8%*1/12) $        192 Interest payable $        384 Note payable $ 28,800 Cash   $ 29,376 (To record repayment of borrowings with interest)

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