The following information applies to the questions displayed below Precision Cas

Question

The following information applies to the questions displayed below Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $39.1 mililion cash on October 1, 2018, to provide working capital for anticipated expansion. Precision signs a one-year, g% promissory note to Midwest Bink under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end value 2.50 points Required information Required: 1. Prepare the journal entries on October 1, 2018, to record the issuance of the note. (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 millons (i.e., $56.5 million should be entered as 5,500,000).) View transaction list Journal entry worksheet 2 Record the issuance of the note by Precision Castparts. Note: Enter debits before credits. Debit Credit Date General Journal October 01, 2018 View general journal Clear entry Record entry

Explanation / Answer

SOLUTION:

Part-1 Oct-01 Cash 39,100,000 Notes payable 39,100,000 Notes receivable 39,100,000 Cash 39,100,000 Part-2 Dec-31 Interest Expense 879,750 Interest payable 879,750 (39,100,000*9%*3/12) Dec-31 Interest receivable 879,750 Interest revenue 879,750 Part-3 Notes payable 39,100,000 Interest Expense (39,100,000*9%*9/12) 2,639,250 Interest payable (39,100,000*9%*3/12) 879,750 Cash 42,619,000 Cash 42,619,000 Interest Expense 2,639,250 Interest receivable 879,750 Notes receivable 39,100,000

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