Answer:
cash 16,000,000 debit
note payable 16,000,000 credit
-- to record issuance of the note--
interest expense 240,000 debit
interest payable 240,000 credit
--to record december 31th adjsuting entry--
note payable 16,000,000 debit
interest expense 1,200,000 debit
interest payable 240,000 debit
Cash 17,440,000 credit
-- to record honor of the note --
Explanation:
Timeline
<--//---------------//-------------------------//-->
Issuance adjusting entry maturity
Issuance: the note enter the accounting at his face value along with the cash received.
adjusting entry at year-end
the company recognize the accued interest expense for 2 complete months (Nov 1st to Dec 31th)
16,000,000 x .12 x 2/12 = 240,000
at maturity Quantum Technology pays the principal and interest:
16,000,000 x .12 x 9/12 = 1,440,000
but a portion of this interest are accrued already an recognize as a payable so we write-them off.
