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On August 31, XYZ Co. partially refunded SAR180,000 of its outstanding 10% note payable made...

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Question

Accounting

On August 31, XYZ Co. partially refunded SAR180,000 of its outstanding 10% note payable made one year ago to ABC State Bank by paying SAR180,000 plus SAR18,000 interest, having obtained the SAR198,000 by using SAR52,400 cash and signing a new one-year SAR160,000 note discounted at 9% by the bank.

Instructions

1- Make the entry to record the partial refunding. Assume XYZ Co. makes reversing entries when appropriate.

2- Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount.

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