Coa Limited is required to comply with new production legislation. In order to meet these requirements, they will need to purchase a new machine. On January 1, 2019, Lambton Limited borrowed $320,000 from the government by way of an interest free loan. The only conditions for the loan to be interest free are:

1. The proceeds must be used to purchase the machine.

2. The $320,000 note must be repaid in full on December 31, 2023.

The companys credit rating permits it to borrow funds from its several lines of credit at 6%.

Required

a) Prepare the journal entry to record the issue of the note on January 1, 2019.

b) Prepare any adjusting journal entry required related to the note at December 31, 2019 ( year-end) using the effective interest method. If no entry is required, write No Entry.