On august 1, 2021, trico technologies, an aeronautic electronics company, borrows $20.6 million cash to expand operations. the loan is made by firstbanc corp. under a short-term line of credit arrangement. trico signs a six-month, 6% promissory note. interest is payable at maturity. firstbanc corp.’s year-end is december 31.

required:

1. record the issuance of note.

2. record the adjustment for interest.

3. record the repayment of the note at maturity.

1.

Aug 1st,2021;  Entry to record note issuance is as followed:

Dr Note Receivable   $20,600,000

Cr Cash                      $20,600,000

(to record the issuance of note to Trico Technologies)

2.

Dec 31st,2021; Entry to record interest income from note receivable:

Dr Interest revenue receivable      $515,000

Cr Accrued Interest Income          $515,000

(to record accrued interest income of 5 months; calculated as 20,600,000 x 6% x 5/12 = $515,000)

3. January 31st, 2022; Entry to record repayment of the note at maturity:

Dr Cash                                              $21,218,000

Cr Interest Income                           $103,000

Cr Note Receivable                         $20,600,000

Cr Interest Income receivable        $515,000

( to record the repayment of the principal and interest income, in which 5 months of interest income had already been recorded in 2021, the other 1 month of interest income $103,000 (20.6 million x 6%/12) is recorded at the end of January which is also maturity time.

Explanation:

unique selling propisition