Question

Buffalo Company borrowed $32,400 on November 1, 2020, by signing a $32,400, 8%, 3-month note. Prepare Buffalo’s November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, entry.

Answer 1

Date	Accounts title	Debit	Credit
01-Nov-20	Cash	$32,400
	Notes payable		$32,400
	(to record borrowings)
31-Dec-20	Interest Expense	$432
	Interest Payable ($32400 x 8% x 2/12)		$432
	(to record adjustments of 2 months)
01-Feb-21	Notes Payable	$32,400
	Interest Expense ($32400 x 8% x 1/12)	$216
	Interest Payable	$432
	Cash		$33,048
	(to record payment)