Question

Steve Acrobats lent $13,798 to Donaldson, Inc., accepting Donaldson's 2-years, $17,000, zero-interest-bearing note. The implied interest rate is 11% Prepare Steve's journal entries for the initial transaction, recognition of interest each year, and the collection of $17,000 at maturity. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. ACCount Titles and Explanation Debit Credit Cash 1. 13798 Discount on Notes Payable 3202 Notes Payable 17000 (To record the initial transations) Interest Expense 2. 1601 1601 Discount on Notes Payable (To record the recognition of interest in year one) Interest Expense 3. 1601 Discount on Notes Payable 1601 (To recognize the interest in year 2) Notes Payable 4. 17000 Cash 17000 (To record the collection of the note)

Answer 1

Journal Entries
Date	Account Title and explanation	Debit	Credit
1	Cash	$                  13,798
	Discount on note Payable	$                     3,202
	Notes Payable		$                     17,000
2	Interest Expesnes	$                     1,601
	Discount on note payable		$                       1,601
3	Interest Expesnes	$                     1,601
	Discount on note payable		$                       1,601
4	Notes Payable	$                  17,000
	Cash		$                     17,000