Dougald Construction Ltd. borrowed $250,000 from TD Bank on October 1, 2011, for a nine-month period; 5% interest is payable at maturity. Both companies have a December 31 year end and make adjusting entries annually.
Instructions
(a) For Dougald Construction, record
(1) The receipt of the bank loan on October 1, 2011;
(2) The accrual of interest on December 31, 2011;
(3) The payment of the loan on July 1, 2012.
(b) For the TD Bank, record
(1) The issue of the bank loan on October 1, 2011;
(2) The accrual of interest on December 31, 2011;
(3) The collection of the loan on July 1, 2012.