Question

The following selected transactions relate to liabilities of United Insulation Corporation. United’s fiscal year ends on December 31.

2021

Jan.		13		Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $29.5 million at the bank’s prime rate.
Feb.		1		Arranged a three-month bank loan of $7.2 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 7% was payable at maturity.
May		1		Paid the 7% note at maturity.
Dec.		1		Supported by the credit line, issued $16.9 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 6% discount rate.
		31		Recorded any necessary adjusting entry(s).

2022

Sept.

1

Paid the commercial paper at maturity.

Required:

Prepare the appropriate journal entries through the maturity of each liability. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars.)

Answer 1

General Journal

Date	Account Title and Explanation	Debit	Credit
Jan.13.2021	No Journal Entry
Feb.01.2021	Cash	$7,200,000
	Notes Payable		$7,200,000
May.01.2021	Interest Expenses ($7200,000×7%×3/12)	$126,000
	Notes Payable	$7200,000
	Cash		$7,326,000
Dec.01.2021	Cash	$16,139,500
	Discount on Notes Payable ($16,900,000×6%×9/12)	$760,500
	Notes Payable		$16,900,000
Dec.31.2021	Interest Expense	$84,500
	Discount on Notes Payable($16,900,000×6%×1/12)		$84,500
Sep.01.2022	Interest Expense ($16,900,000×6%×8/12)	$676,000
	Discount on Notes Payable		$676,000
Sep.01.2022	Notes Payable	$16,900,000
	Cash		$16,900,000