Problem 13-1 Bank loan; accrued interest [LO13-2] Blanton Plastics, a household plastic product manufacturer, borrowed $14 million...

60.1K

Verified Solution

Question

Accounting

Problem 13-1 Bank loan; accrued interest [LO13-2]
Blanton Plastics, a household plastic product manufacturer,borrowed $14 million cash on October 1, 2018, to provide workingcapital for year-end production. Blanton issued a four-month, 12%promissory note to L&T Bank under a prearranged short-term lineof credit. Interest on the note was payable at maturity. Eachfirm’s fiscal period is the calendar year.

Required:
1. Prepare the journal entries to record (a) theissuance of the note by Blanton Plastics and (b) L&T Bank’sreceivable on October 1, 2018.
2. Prepare the journal entries by both firms torecord all subsequent events related to the note through January31, 2019.
3. Suppose the face amount of the note wasadjusted to include interest (a noninterest-bearing note) and 12%is the bank’s stated discount rate. (a) Prepare the journal entriesto record the issuance of the noninterest-bearing note by BlantonPlastics on October 1, 2018, the adjusting entry at December 31,and payment of the note at maturity. (b) What would be theeffective interest rate?

Answer & Explanation Solved by verified expert

4.5 Ratings (592 Votes)

Please hit LIKE button if this helped For any further explanation please put your query in comment will get back to you Part 1 Event Date Account Debit Credit Blanton Oct 1 2018 Cash 14000000 Note Payable 14000000 To record issuance of Note LT Bank Oct 1 2018 Note Receivable 14000000 Cash 14000000 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member