Blanton Plastics, a household plastic product manufacturer, borrowed $16 million cash on October 1, 2013, to provide working capital for year-end production. Blanton issued a four-month, 9% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firms fiscal period is the calendar year.

Required:

1.

Prepare the journal entries to record (a) the issuance of the note by Blanton Plastics and (b) L&T Banks receivable on October 1, 2013. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

2.

Prepare the journal entries by both firms to record all subsequent events related to the note through January 31, 2014. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

3.

Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 9% is the banks stated discount rate.

(a)

Prepare the journal entries to record the issuance of the noninterest-bearing note by Blanton Plastics on October 1, 2013, the adjusting entry at December 31, and payment of the note at maturity. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

(b) What would be the effective interest rate? (Round your answer to 1 decimal place.)