Notes Payable and Interest
On July 1, 2016, Kamer's Trinkets borrowed $39,000 from the bank. Kamer signed a ten-month, 8% promissory note for the entire amount. Kamer's uses a calendar year-end.
Required:
1. Prepare the journal entry on July 1 to record the issuance of the promissory note. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
2. Prepare any adjusting entries needed at year-end. Use months in calculation. Do not round intermediate calculations. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
3. Prepare the journal entry on May 1 to record the payment of principal and interest. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.