The following selected transactions relate to liabilities of United Insulation C
ID: 2400510 • Letter: T
Question
The following selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31 2016 Jan.13 Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank Feb.1 Arranged a three-month bank loan of $6.2 million with Parish Bank under the line of credit May 1 Paid the 13% note at maturity approval. The amount available under the line of credit is $27.0 million at the bank's prime rate agreement. Interest at the prime rate of 13% was payable at maturity Dec.1 Supported by the credit line, issued $14.9 million of commercial paper on a nine-month note Interest was discounted at issuance at a 12% discount rate Recorded any necessary adjusting entry(s). 31 2017 Sept.1 Paid the commercial paper at maturity Required Prepare the appropriate journal entries through the maturity of each liability 2016 and 2017. (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.) View transaction list Journal entry worksheet 4 Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $27.0 million at the bank's prime rate Note: Enter debits before credits Date General Journal Debit Credit Jan 13, 2016 Record entry Clear entry View general journalExplanation / Answer
SOLUTION
Date Account titles and Description Debit ($) Credit ($) 2016 Jan.31 No Entry Required Feb. 1 Cash 6,200,000 Notes payable 6,200,000 (To record receipt of loan) May 1 Notes payable 6,200,000 Interest expense ($6,200,000*13%*3/12) 210,500 Cash 6,401,500 (To record payment of note at maturity) Dec.1 Cash 13,559,000 Discount on notes payable($14,900,000*12%*9/12) 1,341,000 Notes Payable 14,900,000 (To record issue of commercial paper) Dec.31 Interest Expense($14,900,000*12%*1/12) 149,000 Discount on Notes payable 149,000 (To record interest accrued) 2017 Sept.1 Interest expense ($14,900,000*12%*8/12) 1,192,000 Discount on notes payable 1,192,000 (To record interest accrued) Notes payable 14,900,000 Cash 14,900,000 (To record payment of commercial paper at maturity)