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Problem 8-2A Record notes payable and notes receivable (LO8-2) [The following information applies to the questions displayed below.] Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2021, to provide working capital for anticipated expansion. Precision signs a one-year, 9% 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. Problem 8-2A Part 3 3. Prepare the journal entries on September 30, 2022, to record payment of the notes payable at maturity. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.)

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Answer:

Journal entries to record payment of the notes payable on September 30, 2022:

Sept 30, 2022:

Debit Notes Payable Account (Midwest Bank) with $41,000,000

Debit Interest on Notes Payable with $3,690,000

Credit Cash Account with $44,690,000

Being payment of the notes payable and interest on maturity.

Explanation:

a) Interest on notes = $41,000,000 x 9% = $3,690,000

b) The debit to the Notes Payable account will cancel the earlier credited amount, which recorded the liability when it was first received.

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