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29 November, 01:05

On October 1, Willette Company borrowed $120,000 cash and issued a six-month, 10% promissory note. Interest is payable at maturity. Willette has a calendar year-end and has not yet accrued any interest on the note. Prepare the appropriate adjusting entry dated December 31.

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  1. 29 November, 03:41
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    Cash borrowed = $120,000

    Interest on promissory note = 10%

    The journal entry is as follows:

    On December 31,

    Interest expense A/c Dr. $3,000.00

    To Interest payable $3,000.00

    (To record interest accrued on note)

    Working notes:

    Interest expense:

    = $120,000 * 10% * (3/12)

    = $120,000 * 0.1 * (1/4)

    = $3,000
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