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16 August, 08:09

On April 1, Online Travel issues $12.6 million of commercial paper with a maturity on December 31 and a 8% interest rate. Record the issuance of the commercial paper and its repayment at maturity.

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  1. 16 August, 11:34
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    The Journal entries are as follows:

    (i) On April 1st,

    Cash A/c Dr. $12,600,000

    To commercial paper payable $12,600,000

    (To record issuance of the commercial paper)

    (ii) On December 31st,

    Interest expense A/c Dr. $756,000

    Commercial paper payable A/c Dr. $12,600,000

    To cash $13,356,000

    (To record commercial paper repayment at maturity)

    Workings:

    Interest expense = $12,600,000 * 8% * 9/12

    = $756,000
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