During 2017, Alabaster Co. borrowed cash from Fuchsia Enterprises by issuing notes payable as follows:
1. June 1, 2017, issued a seven-month, 4% note for $50,000. Interest and principal are payable at maturity.
2. September 30, 2017, issued a one-year, 3.5% note for $80,000. Interest is payable quarterly, on December 31, 2017, and March 31, June 30, and September 30, 2018. Principal is payable at maturity.
3. October 1, 2017, issued a three-month, 5.5% note for $45,000. Interest is payable monthly on the first day of the month. Principal is payable at maturity.
Both Alabaster and Fuchsia prepare adjusting entries on an annual basis. Alabaster has an October 31 fiscal year end. Fuchsia's fiscal year end is November 30.
Instructions
(a) Prepare all necessary journal entries for Alabaster in 2017 and 2018 regarding the notes and interest including adjusting entries. Prepare separate adjusting entries for each note if an adjustment is required.
(b) Prepare all necessary journal entries for Fuchsia in 2017 and 2018 regarding the notes and interest, including adjusting entries. Prepare separate adjusting entries for each note if an adjustment is required.
TAKING IT FURTHER
Is it appropriate for Fuchsia to have interest receivable on its November 30, 2017, balance sheet if the interest isn't due until some point after the year end? Explain.