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8 March, 01:26

On August 1, 2018, Trico Technologies, an aeronautic electronics company, borrows $20.3 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 6% promissory note. Interest is payable at maturity. FirstBanc Corp.'s year-end is December 31.

Record the necessary entries in the Journal Entry Worksheet

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  1. 8 March, 02:56
    0
    August 1,2018

    Issuance of Note

    Dr. Cash $20,300,000

    Cr. Note payable $20,300,000

    December 31,2018

    Interest Accrued

    Dr. Interest Expense $507,500

    Cr. Interest payable $507,500

    February 1, 2019

    Payment of Note

    Dr. Note Payable $20,300,000

    Dr. Interest Payable $507,500

    DR. Interest Expense $101,500

    Cr. Cash $20,909,000

    Explanation:

    Note Payable is promise in writing to pay a sum of money in future. The money normally consists of Principal and interest.

    Principal value = $20,300,000

    The interest of 5 months is accrued at December 31 and it will be recorded.

    Payment of Interest and Principal is made on February 1,2019

    Accrued Interest = $20,300,000 x 6% x 5/12 = $507,500

    Interest Expense on maturity = $20,300,000 x 6% x 1/12 = $101,500
  2. 8 March, 03:42
    0
    Aug 1

    Dr Cash 20,300,000

    Cr Notes payable 20,300,000

    Dec 31

    Dr Interest expense 510,000

    Cr Interest payable 510,000

    Jan 31

    Dr Notes payable 20,400,000

    Dr Interest expense 102,000

    Dr Interest payable 522,500

    Cr Cash 21,024,500

    Explanation:

    Trico Technologies Journal entries

    Aug 1

    Dr Cash 20,300,000

    Cr Notes payable 20,300,000

    Dec 31

    Dr Interest expense 510,000

    Cr Interest payable 510,000

    (20,400,000*5/12*6%)

    Jan 31

    Dr Notes payable 20,400,000

    Dr Interest expense 102,000

    ($20,400,000*1/12*6%)

    Dr Interest payable 522,500

    (20,400,000*5/12*6%)

    Cr Cash 21,024,500
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