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26 December, 15:43

Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2018, to provide working capital for anticipated expansion. Precision signs a one-year, 9% promissory note to Midwest Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.

1. Record the necessary entry for the scenarios given above.

2. Record the adjustments on December 31, 2018.

3. Prepare the journal entries on September 30, 2019, to record payment of the notes payable at maturity.

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  1. 26 December, 18:22
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    Answer: Precision journal $

    Oct 1,2018

    1. Bank Dr 41m

    Midwest Bank Cr. 41m

    Narration. Issuance of promissory note of $41m, 9%, 1yr promissory note to Midwest for loan.

    Dec 31 2018

    2. Loan interest Dr 922,500

    Midwest Bank Cr 922,500

    Narration. Interest due on promissory note of 41m 9% 1 year promissory note as at date.

    September 30,2019

    Midwest Bank Dr 44,690,000

    Bank. Cr. CR 44,690,00

    Narration. Payment of 41m, 9 %, 1 yr promissory note to Midwest maturity.
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