Question

On January 1, 2016, Johnson Corporation issued a 2-year note due December 31, 2017, with a face value of $10,000, receiving $7,694.68 in exchange.

Required:

Prepare the journal entries to account for the note:

1.	on the date the note is issued
2.	at the end of 2016
3.	at the end of 2017

Answer 1

	Date	Account Title and explanation	Debit	Credit
1	Jan, 01 2016	Cash	7694.68
		Discount on Note payable	2305.32
		Note payable		10000
		(To record issue of note on discount)
2	Dec, 31 2016	Interest expense	1152.66
		Discount on Note payable		1152.66
		(To record amortization of discount)
3	Dec, 31 2017	Interest expense	576.33
		Discount on Note payable		576.33
		(To record amortization of discount)
		Note Payable
		Cash
		(To record repayment