Exercise 2: Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $39.6 million cash on October 1, 2021 to provide working capital for anticipated expansion. Precision signs a one-year, 7% promissory note to Midwest Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.

Record the adjustments on December 31, 2021 for (a) Precision Castparts, and (b) Midwest Bank.