Question

On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $19.7 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, 9% promissory note. Interest is payable at maturity. Trico’s year-end is December 31.
Required:
Record the necessary entries in the Journal Entry Worksheet below for Trico Technologies. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)

Answer 1

Answer: Please see answers in explanation ncolumn

Explanation:

Journal entry for Trico Technologies

1) To record issuance of notes

Date             General Journal        Debit          Credit

Aug 1st 2021    Cash                 $19,700,000  

                           Notes Payable                           $19,700,000

Adjustment for Interest

= Principal x rate x time ( from August to December 31st)

$19,700,000 X 9% X 5/12=$738,750

To record accrual of interest at Year end.

Date             General Journal        Debit           Credit  

Dec 31st,2021   Interest expense $738,750

Interest payable                                                           $738,750

3. Record Payment of Note at maturity

Date             General Journal        Debit           Credit  

Jan 31st,2022     Notes payable      $19,700,000

Interest Expense   $147,750

Interest payable                                  $738,750

Cash $20,586,500

Interest Expense  =Principal x rate x time ( the remaining one month

$19,700,000 X 9% X 1/12=$147,750