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

Instructions

(1) Make the entry to record the partial refund. Assume that Jenks Co. makes reverse entries where appropriate.

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