Question

BE13-2 (L01) Upland Company borrowed \(40,000 on November 1, 2017, by signing a \)40,000, 9%, 3-month note. Prepare Upland’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.

Short answer

The total amount of interest expense paid by the company over the 3 months notes is $900.

Step-by-step solution

Meaning of Loan

A person or business entity borrows an amount from a lending institution for a pre-determined interest payment. The purpose of the loan is to meet the needs of money. It is shown as a liability on the balance sheet.

Journal Entries

Date	Accounts and Explanation	Debit $	Credit $
November 1, 2017	Cash	$40,000
	Notes Payable		$40,000
December 31, 2017	Interest Expenses	$600
	Interest Payable($40,000 x 9% x 2/12)		$600
February 1, 2018	Notes Payable	$40,000
	Interest Payables	$600
	Interest expenses($40,000 x 9% x 1/12)	$300
	Cash		$40,900