Prepare the journal entries for December

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Problem - Kingbird, Inc. provided several entertainment services to Monty Corporation in the past. On January 1, 2020, when the receivable for the past services was due, Monty was unable to pay the outstanding balance. Kingbird, Inc. agreed to accept a $420,000 non-interest bearing note payable on December 31, 2021. Monty typically could arrange this kind of financing at an interest rate of 15%.

Required -

1. Prepare the journal entry to record this transaction for Kingbird, Inc. on Jan 1, 2020.

2. Prepare the journal entries for December 31, 2020 and 2021 using the effect interest method, and assuming that Monty pays the note on schedule.

Reference no: EM132846471

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