Question

Ontario Resources, a natural energy supplier, borrowed $80.6 million cash on November 1, 2021. to fund a geological Survey. The loan was made by Quebec Banque under a short-term financing arrangement Ontario Resources issued a 9-month, 129 promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year Required: 1. Prepare the journal entry for the issuance of the note by Ontario Resources 2. & 3. Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 2021 and journal entry for the payment of the note at maturity Complete this question by entering your answers in the tabs below. Reg1 Reg 2 and Prepare the journal entry for the issuance of the note by Ontario Resources. (If no entry is required for a transaction/event, select journal entry required in the first account field. Enter your answers View transaction list Journal entry worksheet Record the issuance of the note by Ontario Resources. General Journal Debit Credit Date 11/01/2021 | < Prev 14 of 34 Hi! Next >

Answer 1

The interest is 12% pa payable for 9 months wherein 2 months viz. Nov and Dec fall in 2021 and balance 7 months ie Jan to July fall in 2022. Hence interest is calculated accordingly.

1	1/11/2021	Cash a/c Dr	80,600,000.00
		To Notes Payable a/c		80,600,000.00
2	31/12/2021	Interest Expense (80600000*12% * 2/12) Dr	1,612,000.00
		To Interest Payable		1,612,000.00
3	01/08/2022	Interest expense a/c (80600000*12% * 7/12) Dr	5,642,000.00
		Interest Payable a/c Dr	1,612,000.00
		Notes Payable Dr	80,600,000.00
		To Cash a/c		87,854,000.00

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