Question

Flint Company borrowed $49,200 on November 1, 2020, by signing a $49,200, 10%, 3-month note. Prepare Flint’s November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, 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. Record journal entries in the order presented in the problem.)

Answer 1

Explanation:

The journal entries are as follows:

On November 1, 2020

Cash A/c Dr $49,200

         To Notes payable A/c $49,200

(Being the amount is borrowed)

On December 31, 2020

Interest expense A/c Dr $820

           To Interest payable A/c $820

(Being the interest expense is recorded)

The computation is shown below:

= $49,200 × 10% × 2 months ÷ 12 months

= $820

On February 1, 2021

Interest expense A/c Dr $410

Interest payable A/c Dr $820

Notes payable A/c Dr $49,200

                 To Cash A/c $50,430

(Being cash is paid on maturity)

The computation is shown below:

= $49,200 × 10% × 1 months ÷ 12 months

= $410