On November 1, 2012, Sokos Company accepted a three-month, 6%, $40,000 note from a customer in settlement of the customer's account. Interest is due on the first day of each month, starting December 1. The company's yearend is December 31.

Instructions

(a) Prepare all journal entries for Sokos over the term of the note. Assume that the customer settles the note in full on the maturity date.

(b) Assume that instead of honouring the note at maturity, the customer dishonours it. Prepare the necessary journal entry at the maturity date, February 1, 2013, assuming that eventual collection of the note is (1) expected, and (2) not expected.