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 $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). 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

Date	General Journal	Debit	Credit
Jan 13, 2021	No Journal entry required
Feb 01, 2021	Cash	$8,400,000
	Notes Payable		$8,400,000
May 01, 2021	Interest expense	$210,000		($8,400,000 × 10% × 3/12)
	Notes payable	$8,400,000
	Cash		$8,610,000
Dec 01, 2021	Cash	$17,064,750
	Discount on notes payable	$1,235,250		($18,300,000 × 9% × 9/12)
	Notes payable		$18,300,000
Dec 31, 2021	Interest expense	$137,250
	Discount on notes payable		$137,250
working
	Effective interest rate is 9.6515% ($1,235,250 ÷ $17,064,750) × 12/9
	Interest expense ($17,064,750 × 9.6515% × 1/12) = $137,250
Sep 01, 2021	Interest expense	$1,098,000		Interest expense ($18,300,000 × 9% × 8/12) = $1,098,000
	Discount on notes payable		$1,098,000
Sep 01, 2021	Notes Payable	$18,300,000
	Cash		$18,300,000

Answer 2

On Januari 1, 2012, Poplar Fabricators Company agreed to grant its employees two weeks