INTEREST-BEARING NOTE REPLACING AN UNPAID ACCOUNT PAYABLE
Monte Cristo Products owed $100,000 on account for inventory purchased on Novem- ber 1, 2010. Monte Cristo's fiscal year ends on December 31. Monte Cristo was unable to pay the amount owed by the January 31 due date because of financial difficulties. On February 1, 2011, Monte Cristo signed a $100,000, 12 percent interest-bearing note. This note was repaid with interest on August 31, 2011.
Required:
1. Prepare the entry recorded on November 1, 2010.
2. Prepare the adjusting entry recorded on December 31, 2010.
3. Prepare the entry recorded on February 1, 2011.
4. Prepare the entry recorded on August 31, 2011.