During 2017, Aubergine Co. borrowed cash from Chartreuse Company by issuing notes payable as follows:
1. July 1, 2017, issued an eight-month, 4% note for $75,000. Interest and principal are payable at maturity.
2. November 1, 2017, issued a three-month, 5% note for $42,000. Interest is payable monthly on the first day of the month. Principal is payable at maturity.
Aubergine has a December 31 fiscal year end and prepares adjusting entries on an annual basis.
Instructions
(a) Prepare all necessary journal entries for Aubergine Co. to record the notes.
(b) Prepare the necessary interest payment transactions for Aubergine in 2017 and 2018. Prepare separate adjusting entries for each note.