INTEREST AMORTIZATION AND INTEREST MATCHING FOR ZERO-COUPON NOTE USING T-ACCOUNTS. Kerwin Company borrowed $10,000 on a 2-year, zero-coupon note. The note was issued on January 1, 19x8. The face amouitt of the note,

$12,544, is to be paid at maturity on December 31, 19x9.

REQUIRED:

1. Allocate the interest of $2,544 to the two 1-year interest periods, using straight-line interest amortization.

2. Prepare the T-account entries to recognize the borrowing, the first year’s interest expense, and the second year’s interest expense plus redemption of the note at maturity.