Answer:
A a) Journal Entry for Precision Castparts
Debit Bank $39.8 million Credit Note Payable $39.8 million
b) Journal Entry for Midwest bank
Debit Note Receivable $39.8 million Credit Bank $39.8 million
B a) Journal Entry for Precision Castparts
Debit Interest Expense $796,000 Credit Interest Payable $796,000
b) Journal Entry for Midwest bank
Debit Interest Receivable $796,000 Credit Interest Income $796,000
C a) Journal Entry for Precision Castparts
Debit Note Payable $39.8 million Debit Interest Payable $796,000 Debit interest Expense $2,388,000 Credit Bank $42,984,000
b) Journal Entry for Midwest bank
Debit Bank $42,984,000 Credit Note Receivable $39.8 million Credit Interest Receivable $796,000 Debit interest Income $2,388,000
Explanation:
Interest up to 31 Dec 2021
Interest = 39,800,000*8% = $3,184,000*3/12 =$796,000
