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Notes Payable

Essential Company, which manufactures steel tubing and casing for automobile production, borrowed $720,000 on January 1 to finance the purchase of a new piece of machinery with new heating technology. The terms of Essentials note dictate that it is a 8-month, 12%, interest-bearing note.

Required:

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1. Record the borrowing transaction. If an amount box does not require an entry, leave it blank.

Jan. 1	Accounts ReceivableCashMachineryNotes PayableNotes Receivable
	Accounts PayableAccounts ReceivableCashNotes PayableNotes Receivable
	(Record issuance of note payable)

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2. Record the repayment transaction. If an amount box does not require an entry, leave it blank.

Sept. 1	Accounts PayableAccounts ReceivableCashNotes PayableNotes Receivable
	Accounts PayableCashInterest ExpenseInterest PayableInterest Receivable
	Accounts ReceivableCashInterest ExpenseInterest ReceivableNotes Payable
	(Record payment of interest and principal)