Ontario Resources, a natural energy supplier, borrowed $79.0 million cash on November 1, 2021, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 6-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Ontario Resources. 2. Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 2021 and journal entry for the payment of the note at maturity.

1. Nov 1, 2021

Dr Cash79,000,000

Cr Note payable 79,000,000

2. Dec 31, 2021

Dr Interest expense1,580,000

Cr Interest payable 1,580,000

3. May 1, 2022

Dr Note payable79,000,000

Dr Interest payable1,580,000

Dr Interest expense3,160,000

Cr Cash 83,740,000

Explanation:

1. Preparation of the journal entry for the issuance of the note

Nov 1, 2021

Dr Cash79,000,000

Cr Note payable 79,000,000

(To record issue of note)

2. Preparation of the appropriate adjusting entry for the note

Dec 31, 2021

Dr Interest expense1,580,000

Cr Interest payable 1,580,000

(79,000,000 x 12% x 2/12)

(To record interest expense at year end)

3. Preparation of journal entry for the payment of the note at maturity.

May 1, 2022

Dr Note payable79,000,000

Dr Interest payable1,580,000

(79,000,000 x 12% x 2/12)

Dr Interest expense3,160,000

(79,000,000 x 12% x 4/12)

Cr Cash 83,740,000

(79,000,000+1,580,000+3,160,000)

(To record payment of note at maturity)