On August 31, Pell Co. partially refunded $180,000 of its outstanding 10% note payable made one year ago to National Bank by paying $180,000 plus $18,000 interest, having obtained the $198,000 by using $52,400 cash and signing a new one-year $160,000 not discounted at 9% by the bank.

a) Make the entries to record the partial refunding. Assume Pell Co. makes reversing entries when appropriate.

b)Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount.

morgaine300

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Chief78

Here is what I have come up with:

Aug 31 DB-Notes Payable 180,000
DB-Interest Payable 18,000
CR-Cash 52,400
CR-Notes Payable 145,600
Dec 31 DB-Interest Expense 14,400
CR-Interest Payable 14,400
DB-Interest Expense 14,400
CR-Discounts on Notes Payable 14,400