Griddley Company borrowed $200,000 from the East Salvador Bank on February 1, 2011, on a three-year, 8.6 percent note. Interest is paid annually on February 1.
1. Record the borrowing transaction in Griddley’s journal.
2. Prepare the adjusting entries made at December 31, 2011 and 2012.
3. Prepare the necessary journal entry to recognize the first interest payment on February 1, 2012 (round to the nearest dollar).
4. Indicate how the note and associated interest would be presented in Griddley’s December 31, 2012, balance sheet.
5. Prepare the necessary journal entries to record the repayment of the note and the last year’s interest payment on February 1, 2014.