Question

Headland Company borrowed $42,000 on November 1, 2017, by signing a $42,000, 9%, 3-month note. Prepare Headland’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.)

Answer 1

Journal in the books of Headland Company
Date	Particulars	Debit	Credit
		Amount	Amount
		($)	($)
1-Nov-17	Cash	42,000
	Note Payable		42,000
	(Being borrowed by signing 3 month contract @ 9%)
31-Dec-17	Interest Expense (42,000 x 9% x 2/12)	630
	Interest Payable		630
	(Being Interest relating to current year booked i.e in current year interest accrued for 2 months)
1-Feb-18	Interest Expense (42,000 x 9% x 1/12)	315
	Interest Payable	630
	Note Payable	42,000
	Cash		42,945
	(Being 3 month note paid along with interest)

Note:

1. Interest rate is considered as 9% P.A.

Regards