On April 1, the Snake River Racing Club (SRRC) purchased ten white-water rafts with a cash price of $3,000 each. SRRC offered to pay for the rafts by making a $5,000 down payment and by singing a $25,000, 8 percent interest-bearing note. The interest and principal on this note would be due in one year.
(a) Prepare the appropriate journal entries in the accounting records of SRRC on the following dates:
1.) April 1, the date the sales agreement is finalized.
2.) December 31, the final day of SRRC's fiscal year.
3.) April 1 of the following year, when the note matures.
(b) Suppose that SRRC does not make and entry pertaining to this note payable in its accounting records on December 31. How will this oversight affect SRRC's financial statements for the year ending December 31? For the following year?