Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 25

Accounting for Debt Financing
Nicole thinks that her business, Nicole's Getaway Spa (NGS), is doing really well and she is planning a large expansion. With such a large expansion, Nicole will need to finance some of it using debt. She signed a one-year note payable with the bank for $50,000 with a 6 percent interest rate. The note was issued October 1, 2014, interest is payable semiannually, and the end of Nicole's accounting period is December 31.
Required:
1. Prepare the journal entries required from the issuance of the note until its maturity on September 30, 2015, assuming that no entries are made other than at the end of the accounting period, when interest is payable and when the note reaches its maturity.
2. Is there any similarity between the way Notes Payable and Notes Receivable are accounted for Explain.