Question

21. On September 1, 2013, Triton Entertainment borrowed $24 million cash to fund a new Fun Park. The loan was made by Nevada Bank under a noncommitted short-term line of credit arrangement. Triton issued a 9-month, 12% promissory note. Interest was payable at maturity. Triton's fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Triton. 2. Prepare the appropriate adjusting entry for the note by Triton on December 31, 2013. 3. Prepare the journal entry for the payment of the note at maturity.

Answer 1

Journal entry

No	Date	account and explanation	Debit	Credit
1	Sept 1	Cash	24
		Notes payable		24
		(To record borrow)
2	Dec 31	Interest expense (24*12%*4/12)	0.96
		Interest payable		0.96
		(To record accrued interest)
3	May 31	Notes payable	24
		Interest payable	0.96
		Interest expense	1.20
		Cash		26.16
		(To record payment)