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Novak Corp. was experiencing cash flow problems and was unable to pay its $104,400 account payable to Pina Corp. when it fell due on September

Novak Corp. was experiencing cash flow problems and was unable to pay its $104,400 account payable to Pina Corp. when it fell due on September 30, 2017. Pina agreed to substitute a one-year note for the open account. The following two options were presented to Novak by Pina Corp

Option 1: A one-year note for $104,400 due September 30, 2018. Interest at a rate of 8% would be payable at maturity
Option 2: A one-year noninterest-bearing note for $112,752. The implied rate of interest is 8%.

*Assume that Pina Corp. has a December 31 year end*

REQUIRED:

1. Assuming Novak Corp. chooses Option 1, prepare the entries required on Pina Corp.s books on September 30, 2017, December 31, 2017, and September 30, 2018.

2. Assuming Novak Corp. chooses Option 2, prepare the entries required on Pina Corp.s books on September 30, 2017, December 31, 2017, and September 30, 2018

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