IBlanton Plastics, a household plastic product manufacturer, borrowed $30 million cash on October 1, 2013, 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. 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, 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.)

3-1 Record the issuance note

3-2 Record the adjusting entry

3-3 Record the interest expense

3-4 Record payment of the note payable

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

* What is the Annual effective rate: