Notes payable
On August 31, 2020, Kamloops Corp. paid the Regal Bank part of an outstanding $ 300,000 long-term 10% note payable obtained one year earlier (August 31, 2019), by paying $ 180,000 plus $ 18,000 interest. In order to do this, Kamloops used $ 51,211 cash and signed a new one-year, zero-interest-bearing $ 160,000 note discounted at 9% by Regal (i.e. the bank issued a note at a discount designed to provide a 9% return over the one year period).
Instructions
a) Prepare the entry to record the refinancing.
b) Prepare the adjusting entry at December 31, 2020 in connection with the new zero-interest-bearing note.

Question

Quizplus · Accepted Answer

The Answer of Notes payable
On August 31, 2020, Kamloops Corp. paid the Regal Bank part of an outstanding $ 300,000 long-term 10% note payable obtained one year earlier (August 31, 2019), by paying $ 180,000 plus $ 18,000 interest. In order to do this, Kamloops used $ 51,211 cash and signed a new one-year, zero-interest-bearing $ 160,000 note discounted at 9% by Regal (i.e. the bank issued a note at a discount designed to provide a 9% return over the one year period).
Instructions
a) Prepare the entry to record the refinancing.
b) Prepare the adjusting entry at December 31, 2020 in connection with the new zero-interest-bearing note.

Notes Payable On August 31, 2020, Kamloops Corp. Paid the Regal Bank