ZERO COUPON NOTE (STRAIGHT LINE)

On December 31, 2008, Felix Products borrowed $80,000 cash on a $105,800, 24-

month zero coupon note. Felix uses the straight-line method of amortization.

Required:

. Record the borrowing in Felix’s journal.

. Prepare the adjusting entries for December 31, 2009.

. Prepare the entry to recognize the 2010 interest expense and repayment of the note on December 31, 2010.