Reference no: EM131990146
Question: Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Nestor Matthews is one of America's most prestigious retailers. Each Christmas season, Nestor Matthews builds up its inventory to meet the needs of Christmas shoppers. A large portion of these Christmas sales are on credit. As a result, Nestor Matthews often collects cash from the sales several months after Christmas. Assume that on November 1 of this year, Nestor Matthews borrowed $4.1 million cash from Bank of Georgia to meet short-term obligations. Nestor Matthews signed an interest-bearing note and promised to repay the $4.1 million in six months. The annual interest rate was 11%. All interest will accrue and be paid when the note is due in six months. Nestor Matthews accounting period ends December 31.
Required: 1. Prepare the journal entry to record the note on November 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)
2. Prepare any adjusting entry required at the end of the annual accounting period on December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)
3. Prepare the journal entry to record payment of the note and interest on the maturity date, April 30. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)
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