On November $16,$ Year $1,$ Clear Glass Company borrowed $$20,000$ from First American Bank by issuing a $90-$day, non$-$interest$-$bearing note. The bank discounted this note at $12\%$ and remitted the difference to Clear Glass.

Required:

$1.$ Prepare the journal entries of Clear Glass to record the preceding information, the related calendar year$-$end adjusting entry, and payment of the note at maturity.

$2.$ Show how the preceding items would be reported on the December $31,$ Year $1,$ balance sheet.

$3.$ Next Level What is Clear Glass Company$$s effective interest rate?

$1.$ Prepare the necessary journal entries to record:

$1.$ the issuance of the note on November $16,$ Year $1$

$2.$ the related adjustment on December $31,$ Year $1$

$3.$ payment of the note on February $15,$ Year $2$

$4.$ interest expense for Year $2$ on February $15,$ Year $2$

November$-$December, Year $1$ entries should be recorded in page $1,$ February, Year $2$ entries should be recorded in page $2.$

General Journal Instructions

PAGE $1$

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

PAGE $2$

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

$2.$ Show how the preceding items would be reported on the December $31,$ Year $1,$ balance sheet.

Balance Sheet Instructions

CLEAR GLASS COMPANY

Partial Balance Sheet

December $31,$ Year $1$

$1$

Current Liabilities:

$2$

$3$

$3.$ What is Clear Glass Company$$s effective interest rate?

Additional Instructions

$\%$

rate for $90$ days