Question

On November 1, 2021, Quantum Technology, a geothermal energy supplier, borrowed $12 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine- month, 11% promissory note. Interest was payable at maturity. Quantum's fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Quantum Technology. 2. & 3. Prepare the appropriate adjusting entry for the note by Quantum on December 31, 2021 and journal entry for the payment of the note at maturity. (For all requirements, if no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet

Answer 1

Journal Entries:

	Date	Account title and explanation	Debit	Credit
1	November 1,2021	Cash	$12,000,000
		Notes payable		$12,000,000
		[To record issuance of notes]
2	December 31,2021	Interest expense [$12,000,000 x 11% x 2/12]	$220,000
		Interest payable		$220,000
		[To record accrued interest expense]
3	August 1,2022	Notes payable	$12,000,000
		Interest expense [$12,000,000 x 11% x 7/12]	$770,000
		Interest payable	$220,000
		Cash		$12,990,000
		[To record cash paid for notes at maturity]