Question

Required Information Problem 8-2B Record notes payable and notes receivable (L08-2) [The following information applies to the questions displayed below.] Eskimo Joe's, designer of the world's second best-selling T-shirt (fust behind Hard Rock Cafe), borrows $20.5 million cash on November 1, 2021. Eskimo Joe's signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. Problem 8-2B Part 1 Required: 1. Prepare the journal entries on November 1, 2021, to record the issuance of the note. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.)

Answer 1

Part 1

Journal

1	Nov. 21, 2021	Cash	20,500,000
		Note payable		20,500,000
2	Nov. 21, 2021	Note receivable	20,500,000
		Cash		20,500,000

Part 2

1	Dec. 31, 2021	Interest expense	307,500
		Interest payable		307,500
	Dec. 31, 2021	Interest receivable	307,500
		Interest revenue		307,500

Part 3

1	April 30, 2022	Note payable	20,500,000
		Interest payable	307,500
		Interest expense	615,000
		Cash		21,422,500
2	April 30, 2022	Cash	21,422,500
		Interest receivable		307,500
		Interest revenue		615,000
		Note receivable		20,500,000

Interest on note on December 31, 2021 = 20,500,000 x 9% x 2/12

= $307,500

Interest on note on April 30, 2022 = 20,500,000 x 9% x 4/12

= $615,000

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