INTEREST-BEARING NOTE EXCHANGE. Conti Products borrowed $45,000 from Bank of America on a 6-month interest-bearing note on December 1, 19x8. Conti’s fiscal year ends on December 31. Before the note became due, Conti encountered financial difficulties. On June 1, 19x9, Conti exchanged the interest-bearing note for a 4-

month, $46,800, 12% interest-bearing note. This note was repaid with interest on October 1, 19x9.

REQUIRED:

1. Prepare the adjusting entry recorded on December 31, 19x8.

2. Prepare the entry to record the exchange of notes on June 1, 19x9.

3. Prepare the entry to record the repayment of the second note on October 1, 19x9.