Sharp Company Borrowed $500,000 on a 6% One-Year, Interest-Bearing Note

question 32

Essay

Sharp Company borrowed $500,000 on a 6% one-year, interest-bearing note dated November 1, 2014 with interest payable at maturity. The annual accounting period ends on December 31. Assume that adjusting entries are only made at December 31, the company's fiscal year-end.
Required:
Prepare journal entries for each of the following dates:
A. November 1, 2014.
B. December 31, 2014.
C. October 31, 2015.

---

Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, encompassing interest payments on debt, loans, and credit lines.

Cost of Goods Sold

Direct expenditures involved in generating the products a company markets, namely materials and labor.

Operating Income

Income generated from a company's primary business activities, excluding deductions for interest and taxes.

Cash Sales

Revenue generated from transactions where payment is made in cash immediately upon purchase.