Question

The following selected transactions relate to liabilities of United Insulation Corporation. United’s fiscal year ends on December 31.

2018

Jan.		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 $30.0 million at the bank’s prime rate.
Feb.		1		Arranged a three-month bank loan of $8.4 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 10% was payable at maturity.
May		1		Paid the 10% note at maturity.
Dec.		1		Supported by the credit line, issued $18.3 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 9% 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.)

Answer 1

Date	Particulars			Debit	Credit
2018				$	$
Jan,13	"No Journal entry required"
Feb,1	Cash a/c			84,00,000
	To Paris Bank Loan a/c				84,00,000
May.1	Interst Expenses a/c			2,10,000
	Paris Bank Loan a/c			84,00,000
	To Cash a/c				86,10,000
Dec,1	Cash a/c			1,70,64,750
	Discount Expenses Payable on Loan a/c			12,35,250
	To Paris Bank Loan a/c				1,83,00,000
Dec,31	Discount Expenses a/c			1,37,250
	To Discount Expenses Payable on Loan a/c				1,37,250
2019
Spet,1	Discount Expenses a/c			10,98,000
	To Discount Expenses Payable on Loan a/c				10,98,000
Spet,1	Paris Bank Loan a/c			1,83,00,000
	To Cash a/c				1,83,00,000
May,1
Interest expenses calculation
	$8400000*10%*3/12= $210000
Dec,1
Discounted note
Discount Exp.	$18300000*9%*9/12=$1235250
Net Cash Amount received	$18300000-$1235250=17064750
Dec,31
Discount exp of 1 month	$18300000*9%/12=137250
Sept, 1
Discount exp of 8 month	$18300000*9%*8/12=1098000