On January 1, 2020, Heritage Company has a note payable to bank in the amount of 2,800,000. 

Transactions during 2020 and other information relating to liabilities are: 

a. Principal amount of the note payable to the bank is 2,800,000 and bears a 12% interest. The note is dated April 1, 2019, and is payable in four equal annual installments beginning April 1, 2020. The first principal and interest payment was made on April 1, 2020

b. On July 1, 2020, the entity issued for 1,774,000 a 2,000,000 face amount note to a wealthy shareholder. The note was dated July 1, 2020, and matures on July 1, 2021. No explicit interest rate is stated in the note and the entire face amount of the note payable at the maturity date

Required

1. Prepare journal entries for 2020. 

2. Compute the total current liabilities on December 31, 2020

3. Determine the interest expense to be reported in 2020

Answer rating: 100% (QA)

Step 1 Notes payable refers to a written promise to pay a certain amount of m... View the full answer