Ch 13 Part 2 HW Question 4 (of 5) value 20.00 points Brief Exercise 13-4 Commerc

Question

Ch 13 Part 2 HW Question 4 (of 5) value 20.00 points Brief Exercise 13-4 Commercial paper LO13-2] Branch Corporation issued $20 mlion of commercial paper on March 1 on a nine-month note. Interest was discounted at issuance at a 11% discount rate Prepare the jounal entry for the issuance of the commercial paper and its repayment at maturity. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars) View transaction list Journal entry worksheet Record the issuance of the commercial paper Note: Enter debits before credits. Event General Journal DebitCredit Station:5 Password: lab-104

Explanation / Answer

Given, issue of commercial papers of $20 million

Interest discount was 11% per annum

Maturity is 9 months

So journal entry is

Debit cash/bank with 18,350,000

Debit discount on commercial papers with 1,650,000

Credit 11% commercial papers with 20,000,000

At the time of maturity journal entry is

11% commercial papers ac debit 20,000,000

Credit bank/cash with 20,000,000

Discount on commercial papers should be amortized equally every month till the maturity.. At the time of maturity discount should be zero

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