Sweet company borrowed $34,800 on november 1, 2020, by signing a $34,800, 9%, 3-month note. prepare sweet’s november 1, 2020, entry; the december 31, 2020, annual adjusting entry; and the february 1, 2021, entry

Explanation:

The journal entries are shown below:

On November 1

Cash A/c Dr $34,800

      To Notes payable A/c $34,800

(Being issuance of the note payable is recorded)

On December 31

Interest expense A/c Dr  $522

     To Interest payable A/c  $522

(Being accrued interest adjusted)

The computation is shown below:

Principal × rate of interest × number of months ÷ (total number of months in a year)  

= $34,800 × 9% × (2 months ÷ 12 months)

= $522

The two month is calculated from the November 1 to December 31

On February 1

Interest Expense A/c Dr $261

Interest payable A/c Dr $522

Note Payable A/c Dr $34,800

        To Cash A/c $35583

(Being payment is recorded)

The computation is shown below:

Principal × rate of interest × number of months ÷ (total number of months in a year)  

= $34,800 × 9% × (1 months ÷ 12 months)

= $261

The one month is calculated from the January 1 to February 1

c is the correct answer.