Question:
1. The given selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31.
Required:
Write the appropriate journal entries through the maturity of each liability.
2013
Jan. 13 Negotiated a revolving credit agreement with Parish Bank that will be renewed annually upon bank approval. The amount available under the line of credit is $20 million at the bank's prime rate.
Feb.1 Arranged a three-month bank loan of $5 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 10% was payable at maturity.
May 1 Paid the 10 percent note at maturity.
Dec. 1 Supported by the credit line, issued $10 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 9% discount rate.
31 Recorded any necessary adjusting entry(s).
2014
2.
An annual report of Sprint Corporation contained a rather lengthy narrative entitled "Review of Segmental Results of Operation." The narrative noted that short-term notes payable and commercial paper outstanding at the end of the year aggregated $756 million and that during the following year "This entire balance will be replaced by the issuance of long-term debt or will continue to be refinanced under existing long-term credit facilities."
Required:
How did Sprint report the debt in its balance sheet? Why?