On August 31, Jenks Co. partially refunded $450,000 of its outstanding 10% note payable made one year ago to Arma State Bank by paying $450,000 plus $45,000 interest, having obtained the $495,000 by using $131,000 cash and signing a new one-year $400,000 note discounted at 9% by the bank.

Instructions

(1) Make the entry to record the partial refunding. Assume Jenks Co. makes reversing entries when appropriate.

(2) Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount.