Chapter 13 HWK - Problem 13-1 Requirement 1 Blanton...

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Unformatted text preview: Problem 13-1 Requirement 1 Blanton Plastics Cash ......................................................................... 14,000,000 Notes payable....................................................... 14,000,000 N,C &I Bank Notes receivable....................................................... 14,000,000 Cash ..................................................................... 14,000,000 Requirement 2 Adjusting entries (December 31, 2009) Blanton Plastics Interest expense ($14,000,000 x 12% x 3 / 12 ) ................ 420,000 Interest payable..................................................... 420,000 N,C &I Bank Interest receivable.................................................... 420,000 Interest revenue ($14,000,000 x 12% x 3 / 12 ) ............. 420,000 Maturity (January 31, 2010) Blanton Plastics Interest expense ($14,000,000 x 12% x 1 / 12 ) ................ 140,000 Interest payable (from adjusting entry)......................... 420,000 Notes payable (face amount)....................................... 14,000,000 Cash (total)............................................................. 14,560,000 N,C&I Bank Cash (total)................................................................. 14,560,000 Interest revenue ($14,000,000 x 12% x 1 / 12 )............... 140,000 Interest receivable (from adjusting entry)................. 420,000 Notes receivable (face amount)............................... 14,000,000 Problem 13-1 (concluded) Requirement 3 a. Issuance of note (October 1, 2009) Cash (difference)......................................................... 13,440,000 Discount on notes payable ($14,000,000 x 12% x 4 / 12 ) 560,000 Notes payable (face amount)......................................... 14,000,000 Adjusting entry (December 31, 2009) Interest expense ($14,000,000 x 12% x 3 / 12 ) ................ 420,000 Discount on notes payable.................................... 420,000 Maturity (January 31, 2010) Interest expense ($14,000,000 x 12% x 1 / 12 ) ................ 140,000 Discount on notes payable.................................... 140,000 Notes payable (face amount)....................................... 14,000,000 Cash ..................................................................... 14,000,000 b. Effective interest rate: Discount ($14,000,000 x 12% x 4 / 12 ) $ 560,000 Cash proceeds $13,440,000 Interest rate for 4 months 4.1666% x 12 / 4 ___________ Annual effective rate 12.5% Problem 13-2 Requirement 1 2009 a. No entry is made for a line of credit until a loan actually is made. It would be described in a disclosure note. b. Cash .................................................................... 12,000,000 Notes payable....................................................
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Chapter 13 HWK - Problem 13-1 Requirement 1 Blanton...

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