The following selected transactions relate to liabilities of Rocky Mountain Adventures. Rocky Mountain’s fiscal year ends on December 31.January 13 Negotiate a revolving credit agreement with First Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $10 million at the banks prime rate.February 1 Arrange a three-month bank loan of $5 million with First Bank under the line of credit agreement. Interest at the prime rate of 7% is payable at maturity. May 1 Pay the 7% note at maturity.Required:Record the appropriate entries, if any, on January 13, February 1, and May 1.
The following selected transactions relate to liabilities of Rocky Mountain Adventures. Rocky Mountain’s fiscal year ends on December 31.January 13 Negotiate a revolving credit agreement with First Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $10 million at the banks prime rate.February 1 Arrange a three-month bank loan of $5 million with First Bank under the line of credit agreement. Interest at the prime rate of 7% is payable at maturity. May 1 Pay the 7% note at maturity.Required:Record the appropriate entries, if any, on January 13, February 1, and May 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following selected transactions relate to liabilities of Rocky Mountain Adventures. Rocky Mountain’s fiscal year ends on December 31.
January 13 Negotiate a revolving credit agreement with First Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $10 million at the banks prime rate.
February 1 Arrange a three-month bank loan of $5 million with First Bank under the line of credit agreement. Interest at the prime rate of 7% is payable at maturity.
May 1 Pay the 7% note at maturity.
Required:
Record the appropriate entries, if any, on January 13, February 1, and May 1.
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