The following selected transactions relate to liabilities of United Insulation C
ID: 2559362 • Letter: T
Question
The following selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31 2018 an. 13 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 $25.0 million at the bank's prime rate Feb. 1 Arranged a three-month bank loan of $7.4 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 12% was payable at maturity May 1 Paid the 12% note at maturity Dec. 1 Supported by the credit line, issued $12.0 million of commercial paper on a nine-month note Interest was discounted at issuance at a 11% discount rate. 31 Recorded any necessary adjusting entry(s). 2019 Sept. 1 Paid the commercial paper at maturity. Required: Prepare the appropriate journal entries through the maturity of each liability 2018 and 2019. (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.)Explanation / Answer
Date Accounts Titles & Explanations Debit Credit 13-Jan-18 No entry required 1-Feb-18 Cash 7400000 Notes payable 7400000 1-May-18 Interest expense 222000 Notes payable 7400000 Cash 7622000 1-Dec-18 Cash 11010000 Discount on notes payable 990000 Notes payable 12000000 31-Dec-18 Interest expense 110000 Discount on notes payable 110000 1-Sep-19 Interest expense 880000 Discount on notes payable 880000 1-Sep-19 Notes payable 12000000 Cash 12000000 *May 1 2018: Interest expense (7400000 * 12% * 3 /12 222000 Notes payable = face value 7400000 Cash (Notes payable + interest expense) 7622000 Dec. 1 2018: Discount on notes payable (12000000 * 11% * 9/12) 990000 Notes ayable (face value) 12000000 Cash (Notes payable - discount on notes payable) 11010000 Dec.31 2018 Interest expense (12000000 * 11% * 1/12) 110000 Sep. 1, 2019 Discount on notes payable (12000000 * 11% * 8/12) 880000