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On June 1, Pearl Ltd borrows $20,000 from their bank by signing a 2 month, 12%, interest-bearing note. Prepare the necessary entries below associated with the note payable on the books of Pearl Ltd. Required: (a) Prepare the entry on June 1 when the note was issued. (b) Prepare any adjusting entries necessary on 30 June in order to prepare the monthly financial statements. Assume no other interest accrual entries have been made. (c) Prepare the entry to record payment of the note at maturity.
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Answer Account Titles and Explanation Debit 20,000 Date Credit June 1 Cash Notes Payable To record amount borrowed by signing Note 20,000 | Jun 30 | Interest Expense ($20,000 * 12% * 1/12) 200 200 Interest Payable Torecord Interest expense accrued) Jul 31 Notes Payable 20,000 200 200 C. Interest Payable Interest Expense ($20,000 * 12% * 1/12) Cash To record pavment of note at maturi 20,400

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