Ch08a - Chapter 08 Current Liabilities Exercise 8-3 E8-3 On...

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Chapter 08 - Current Liabilities 8-1 Exercise 8-3 E8-3 On August 1, 2012, Trico Technologies, an aeronautic electronics company, borrows $20 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, 8% promissory note. Interest is payable at maturity. Trico's year-end is December 31. Required: 1. Record the issuance of the note by Trico Technologies. 2. Record the appropriate adjustment for the note by Trico on December 31, 2012. 3. Record the payment of the note by Trico at maturity. 1. August 1, 2012 Debit Credit Cash 20,000,000 Notes Payable 20,000,000 (Issuance of notes payable) 2. December 31, 2012 Interest Expense ($20 million x 8% x 5/12) 666,667 Interest Payable 666,667 ( Interest expense incurred, but not paid ) 3. January 31, 2013 Notes Payable 20,000,000 Interest Expense ($20 million x 8% x 1/12) 133,333 Interest Payable ($20 million x 8% x 5/12) 666,667 Cash 20,800,000 ( Payment of notes payable and interest )
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Chapter 08 - Current Liabilities 8-2 Exercise 8-12 Requirement 1 The contingent liability is probable and reasonably estimable, so it must be reported.
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