Ontario Resources, a natural energy supplier, borrowed $80.2 million cash on Nov
ID: 2474370 • Letter: O
Question
Ontario Resources, a natural energy supplier, borrowed $80.2 million cash on November 1, 2016, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 6-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year.
Prepare the journal entry for the issuance of the note by Ontario Resources. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 2016 and journal entry for the payment of the note at maturity. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Ontario Resources, a natural energy supplier, borrowed $80.2 million cash on November 1, 2016, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 6-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year.
Explanation / Answer
1. No journal entry required, against the issuance of note in advance on 1st November 2016.
2. Adjusting entry to be passed against interest accrued on loan taken for 2 months @ 12% as on 31st December 2016
Interest expese Account.............Dr $ 1604000
Interest Accrued but not payable.......Cr $ 1604000
3. No journal entry required, for ther payment of the note at Maturity as on 31st December 2016.
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