Question

The following selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31. 2021 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 $27.0 million at the bank's prime rate. Feb. 1 Arranged a three-month bank loan of $6.6 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 13% was payable at maturity. May 1 Paid the 13% note at maturity. Dec. 1 Supported by the credit line, issued $16.3 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 12% discount rate. 31 Recorded any necessary adjusting entry(s). 2022 Sept. 1 Paid the commercial paper at maturity. Required: Prepare the appropriate journal entries through the maturity of each liability. (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

Required: Journal entries.

Date	General Journal	Debit	Credit
2021
Jan 13	No journal entry required
Feb 1	Cash	$6,600,000
	Bank loan		$6,600,000
May 1	Bank loan	$6,600,000
	Interest (6,600,000*13%) * 3/12	$214,500
	Cash		$6,814,500
Dec 1	Cash	$14,833,000
	Discount on notes payable ($16,300,000 * 12%) * 9/12	$1,467,000
	Notes payable		$16,300,000
Dec 31	Interest expense	$163,000
	Discount on note payable (16,300,000 * 12%) * 1/12		$163,000
2022
Sept 1	Notes payable	$16,300,000
	Interest expenses	$1,304,000
	Cash		$16,300,000
	Discount on notes payable (16,300,000 * 12%) * 8/12		$1,304,000