On october 1, steve's carpet service borrows $350,000 from first national bank on a 3-month, $350,000, 8% note. what entry must steve's carpet service make on december 31 before financial statements are prepared?

Recognise Asset - Cash and Liability - Note Payable at $350,000

Recognise Interest Expense accrued on Note Payable at $ 28,000

Explanation:

J1

Bank $350,000 (debit)

Note Payable $350,000 (credit)

Recognise Asset - Cash and Liability - Note Payable at $350,000

J2

Interest Expense $ 28,000 (debit)

Note Payable $ 28,000 (credit)

Recognise Interest Expense accrued on Note Payable at $ 28,000