Motown Corporation signs a line of credit (short-term note payable). Interest and principle are payable in full on the due date. The terms of the line of credit are as follows:

Loan origination date October 1, 20X2

Line of Credit $ 800,000

Annual Interest Rate 3.50%

Length of loan 12.00 months

Balance sheet date December 31, 20X2

Due Date of Interest and Principle October 1, 20X3

1.Prepare the journal entry required at the loan origination date. What is the impact of this journal entry on net income?

2.Prepare the journal entry required at the loan origination date. What is the impact of this journal entry on the liability section of the balance sheet?

3.Prepare the adjusting journal entry required at the balance sheet date. What is the impact of this journal entry on net income?

4.Prepare the adjusting journal entry required at the balance sheet date. What is the impact of this journal entry on the liability section of the balance sheet?

HINT: Recall that part of the interest expense that was attributable to the previous period was already recognized when you recorded your adjusting journal entry for the period at the balance sheet date.

5.Prepare the journal entry required at the payment date. What is the impact of this journal entry on net income?