On July 1, 2018, Nakhooda Limited received an 18-month loan for $40,000 from a bank at 6%

Question:

On July 1, 2018, Nakhooda Limited received an 18-month loan for $40,000 from a bank at 6% and with these funds and another $10,000 cash, purchased a vehicle for $50,000. Prepare the journal entries to record each of the following on Nakhooda's books:

(a) The purchase of the vehicle on July 1, 2018

(b) The accrual of interest at Nakhooda's year end, December 31, 2018 and 2019, assuming adjusting entries are recorded annually and interest is due at maturity

Prepare adjusting and subsequent entries for interest revenue.