CHP. 13 Q.12

Blanton Plastics, a household plastic product manufacturer, borrowed $6 million cash on October 1, 2021, to provide working capital for year-end production. Blanton issued a four-month, 14% 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, 2021. 2. Prepare the journal entries by both firms to record all subsequent events related to the note through January 31, 2022. 3. Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 14% 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, 2021, the adjusting entry at December 31, and payment of the note at maturity. (b) What would be the effective interest rate?

Journal entry worksheet Record the L&T Bank's receivable. Note: Enter debits before credits. General Journal Debit Credit Date October 01, 2021 Record entry Clear entry View general journal Journal entry worksheet Record the adjusting entry for the Blanton Plastics. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021 Record entry Clear entry View general journal Journal entry worksheet Record the adjusting entry for the L&T Bank. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021 Record entry Clear entry View general journal Journal entry worksheet Record the maturity of the note for Blanton Plastics. Note: Enter debits before credits. General Journal Debit Credit Date January 31, 2022 Record entry Clear entry View general journal Journal entry worksheet Record the issuance of note. Note: Enter debits before credits. Date General Journal Debit Credit October 01, 2021 Record entry Clear entry View general journal Journal entry worksheet Record the interest expense at maturity. Note: Enter debits before credits. Date General Journal Debit Credit January 31, 2022 Record entry Clear entry View general journal Journal entry worksheet