Question

1., 2. & 3. Record the necessary entries in the Journal Entry Worksheet below for Trico Technologies.

Record the issuance of note

record the adjustment for interest

record the repayment of the note at maturity

On August 1, 2018, Trico Technologies, an aeronautic electronics company, borrows $20.2 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, 6% promissory note. Interest is payable at maturity. Trico’s year-end is December 31.

Answer 1

Journal entries Amt in Million $
2018
Aug-01 Cash A/c                 dr 20.2
To 6% Promissory Note 20.2
Dec-31 Interest A/c dr 1.01
To Interest Payable A/c 1.01
Dec-31 Profit & Loss A/c                      dr 1.01
To Interest A/c 1.01
2019
Feb-01 6% Promissory Note A/c      dr 20.2 (20.2+1.01)

Interest Payable A/c dr 1.01
To Cash / Bank A/c 21.21

Interest   = 20.2*6%*5/6

                  =1.01