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10 August, 12:02

Sheridan Company borrows $43,400 on July 1 from the bank by signing a $43,400, 8%, one-year note payable. (a) Prepare the journal entry to record the proceeds of the note. (b) Prepare the journal entry to record accrued interest at December 31, assuming adjusting entries are made only at the end of the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

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  1. 10 August, 15:35
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    Sheridan Company

    Journal Entries

    Sr. No Particulars Debit Credit

    1 Cash $ 43,400

    Notes Payable $ 43,400

    Sheridan Company borrows $43,400 on July 1 from the bank by signing a $43,400, 8%, one-year note payable.

    2 Interest Expense $ 1736

    Interest Payable $ 1736

    Recorded Interest Accrued for 6 months

    Explanation:

    Calculation of Interest Payable

    $ 43,400 * 8% = 3472

    For 6 months = $ 3472/2 = $ 1736

    Notes Payable is a liability and interest Payable is also a liability. The Notes Payable will be due in one years time that is on 30 th June of the next year. From July to December there are 6 months so interest is calculated for 6 months.
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