Notes Receivable. On December 31, 2020 Kaplin Inc. provided service to Sports Unlimited, accepting a six percent, five-year promissory note having a maturity value of $800,000 (interest payable annually on December 31). Kaplyn Inc. pays 7 percent for its borrowed funds. Sports Unlimited, however, because it is considered a higher risk, pays 9 percent for its borrowed funds.

Instructions

a) Prepare the journal entries to record the transaction on the books of Kaplyn Inc. at December 31, 2020. (Assume that the effective interest method is used.)

b) Make all appropriate entries for 2021 on the books of Kaplyn.