Question

Sheridan Company borrowed $46,800 on November 1, 2017, by signing a $46,800, 9%, 3-month note. Prepare Sheridan’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.

Answer 1

Date	Accounts title	Debit	Credit	Working
01-Nov-17	Cash	$46,800
	Notes Payable		$46,800
	(Amount borrowed for 3 months)
31-Dec-17	Interest Expense	$702		[46800 x 9% x 2/12]
	Interest Payable		$702
	(2 months interest accrued adjusted)
01-Feb-18	Notes Payable	$46,800		[Face Value]
	Interest Expense	$351		[1 month interest, 46800 x9% x 1/12]
	Interest payable	$702		[earlier credited, now debited, 2 months interest]
	Cash		$47,853	[face value + total 3 months interest]
	(Amount paid on maturity)