On August 1, 2015, Trico Technologies, an aeronautic electronics company, borrow

Question

On August 1, 2015, Trico Technologies, an aeronautic electronics company, borrows $20.0 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, 8% promissory note. Interest is payable at maturity. FirstBanc Corp.’s year-end is December 31.

Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.)

On August 1, 2015, Trico Technologies, an aeronautic electronics company, borrows $20.0 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, 8% promissory note. Interest is payable at maturity. FirstBanc Corp.’s year-end is December 31.

Explanation / Answer

Date Account Titles and Explanation Debit $ Credit $ 08/01/2015 Cash Dr.          20,000,000 Notes Payable Cr.          20,000,000 (Issuance of Notes Payable) 12/31/2015 Interest Expense Dr.                666,667 Interest Payable Cr.                666,667 (Interest expenses incurred but not paid 20 million*5/12*8/100) 01/31/2016 Notes Payable Dr.          20,000,000 Interest Expense Dr.(20mil*8%*1/12)                133,333 Interest Payable Dr.(20mil*8%*1/12)                666,667          20,800,000 Cash Cr. (Payment of notes payable and interest)

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