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Dodge City Products borrowed $100,000 cash by issuing a 36-month, $120,880 zero coupon note on January 1, 2021. The note matures on December 31, 2023.

Dodge City Products borrowed $100,000 cash by issuing a 36-month, $120,880 zero coupon note on January 1, 2021. The note matures on December 31, 2023.

Required:

1. Prepare the entry to recognize the issuance of the note.

2021 Jan. 1 Cash
Discount on Notes Payable
Notes Payable
Record issuance of note at discount

2. Prepare the adjustments to recognize 2021 and 2022 interest.

2021 Dec. 31 Interest Expense
Discount on Notes Payable
Record interest expense
2022 Dec. 31 Interest Expense
Discount on Notes Payable
Record interest expense

3. Prepare the entry to recognize 2023 interest and repayment of the note at maturity.

2023 Dec. 31
Record interest expense
2023 Dec. 31
Record repayment of note principal

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