Accrual of Interest on a Loan On July 1, 2010, Paxson Corporation takes out a 12%, two-month, $50,000 loan at Friendly National Bank. Principal and interest are to be repaid on August 31.

Required 1. Identify and analyze the transactions or adjustments for July 1 to record the borrowing, for July 31 to record the accrual of interest, and for August 31 to record repayment of the principal and interest.

2. Evaluate the following statement: It would be much easier not to bother with an adjustment on July 31 and simply record interest expense on August 31 when the loan is repaid.

AppendixLO1