Entries for and Financial Statement Presentation of a Note

Augustine Corporation borrowed $52,000 from the J.P. Morgan Chase Bank on June 1, 2023, on a 3-year, 8.7% note. Interest is paid annually on May 31.

If required, round amounts to the nearest dollar.

Required:

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1. Record the borrowing transaction in Augustine's journal. If an amount box does not require an entry, leave it blank.

2023, June 1	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Record issuance of note at par

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2. Prepare the adjusting entries made at December 31, 2023 and 2024. If an amount box does not require an entry, leave it blank.

2023, December 31	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Record interest expense
2024, December 31	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Accounts PayableCashInterest ExpenseInterest PayableNotes Payable
	Record interest expense

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3. Prepare the necessary journal entry to recognize the first interest payment on May 31, 2024. If an amount box does not require an entry, leave it blank.

2024, May 31	Accounts PayableCashInterest ExpenseInterest RevenueNotes Payable
	Accounts PayableCashInterest PayableInterest RevenueNotes Payable
	Accounts PayableCashInterest ExpenseInterest RevenueNotes Payable
	Record interest expense and payment of interest

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4. Indicate how the note and associated interest would be presented in Augustine's December 31, 2024 balance sheet.

Current liabilities:
Accounts payableInterest expenseInterest payableInterest revenueNotes payable	$- Select -
Long-term liabilities:
Accounts PayableInterest expenseInterest payable, 8.7%, due in 2026Notes payable, 8.7%, due in 2026Notes receivable, 8.7%, due in 2026	- Select -

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5. Prepare the necessary journal entries to record the repayment of the note and the last year's interest payment on May 31, 2026. If an amount box does not require an entry, leave it blank.

2026, May 31	Accounts PayableCashInterest ExpenseInterest Revenueotes Receivable
	Accounts PayableCashInterest PayableInterest RevenueNotes Payable
	Accounts PayableCashInterest ExpenseInterest RevenueNotes Payable
	Record interest expense and payment of interest
2026, May 31	Accounts PayableCashInterest ExpenseInterest RevenueNotes Payable
	Accounts PayableCashInterest ExpenseInterest RevenueNotes Payable
	Record repayment of note principal