E 13-3

Short-term notes

LO13-2

The following selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31.

Required:

Prepare the appropriate journal entries through the maturity of each liability.

2018Jan. 13Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $20 million at the bank's prime rate.Feb. 1Arranged a three-month bank loan of $5 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 10% was payable at maturity.May 1Paid the 10% note at maturity.Dec. 1Supported by the credit line, issued $10 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 9% discount rate.31Recorded any necessary adjusting entry(s).2019Sept. 1Paid the commercial paper at maturity.