Greenson Corp signed a three month zero interest bearing note on Nov 1, 2014

| March 29, 2017

Question
Greenson Corp signed a three month zero interest bearing note on Nov 1, 2014 for purchase of $250,000 of inventory. The face value of the note was $253,900. Assuming Greenson used a discount on note payable account to initially record the note and the discount will be amortized equally over 3 months period. The adjusting entry made at Dec 31, 2014 will include?

Ok…so the answer is : Interest expense for 2600.

My question is I know the discount on notes payable is 3900 over 3 months. Divide that by 3 to amortize the amount each month. I’m confused as to why the entry wouldn’t just be:

Interest Expense debit 1300

Discount on notes payable credit 1300.

Is it because it says adjusting entry? that’s why I do the remainder?

I’m trying to rationalize in my head to me first interest payment would come out Dec 1, Next would be Jan 1, then last payment would be Feb 1. Am I wrong…do we pay the first interest payment on Nov 1…the day we get the loan?

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