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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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