Answer:
1. Dr Cash $39.1 million
Cr Notes Payable $39.1 million
Dr Notes Receivable $39.1 million
Cr Cash $39.1 million
2. Dr Interest Expense $879,750
Cr Interest Payable $879,750
Dr Interest Receivable $879,750
Cr Interest Revenue $879,750
3. Journal entry for Precision Castparts
Dr Notes payable $39.1 million
Dr Interest expense $2,639,250
Dr Interest payable $879,750
Cr Cash $42,619,000
Journal entry for Midwest Bank
Dr Cash $42,619,000
Cr Notes receivable $39.1 million
Cr Interest receivable $879,750
Cr Interest revenue $2,639,250
Explanation:
1. Preparation of the journal entry to Record the necessary entry for the scenarios given .
Dr Cash $39.1 million
Cr Notes Payable $39.1 million
Dr Notes Receivable $39.1 million
Cr Cash $39.1 million
2. Preparation of the journal entry to Record the adjustments on December 31, 2018.
Dr Interest Expense $879,750
Cr Interest Payable $879,750
(39.1 million*9%*3/12)
Dr Interest Receivable $879,750
Cr Interest Revenue $879,750
(39.1 million*9%*3/12)
3. Preparation of the journal entry on September 30, 2016, to record payment of the notes payable at maturity
Journal entry for Precision Castparts
Dr Notes payable $39.1 million
Dr Interest expense $2,639,250
($39.1 million*9%*9/12)
Dr Interest payable $879,750
(39.1 million*9%*3/12)
Cr Cash $42,619,000
($39.1 million+$2,639,250+$879,750)
Journal entry for Midwest Bank
Dr Cash $42,619,000
($39.1 million+$2,639,250+$879,750)
Cr Notes receivable $39.1 million
Cr Interest receivable $879,750
(39.1 million*9%*3/12)
Cr Interest revenue $2,639,250
($39.1 million*9%*9/12)
