Notes Payable on August 31, 2014, Kamloops Corp

question 149

Essay

Notes payable On August 31, 2014, Kamloops Corp.paid the Regal Bank part of an outstanding $300,000 long-term 10% note payable obtained one year earlier (August 31, 2013), by paying $180,000 plus $18,000 interest.In order to do this, Kamloops used $52,400 cash and signed a new one- year, zero-interest-bearing $160,000 note discounted at 9% by Regal (i.e.the bank deducted 9% from the $160,000). Instructions
a.Prepare the entry to record the refinancing.
b.Prepare the adjusting entry at December 31, 2014 in connection with the new zero-interest-
bearing note.

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