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29 June, 00:54

Ontario Resources, a natural energy supplier, borrowed $80 million cash on November 1, 2018, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 9-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year. Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 2018.

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  1. 29 June, 01:37
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    The journal entries are shown below:

    On December 31, 2018

    Interest expense Dr $1,600,000

    To Interest payable $1,600,000

    (Being the interest expense is recorded)

    The computation is shown below:

    = Borrowed amount * rate of interest * number of months : total number of months in a year

    = $80,000,000 * 12% * 2 months : 12 month

    = $1,600,000

    The two month is calculated from November 1 to December 31
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