Bank of America loaned Miller Paint Company $1,500,000 on May 1, 20X0. The loan plus interest of

Question:

Bank of America loaned Miller Paint Company $1,500,000 on May 1, 20X0. The loan plus interest of 4% is payable on May 1, 20X1.

1. Using the balance sheet equation format (refer to page 149 for an example), prepare an analysis of the impact of the transaction on both Bank of America’s and Miller’s financial position on May 1, 20X0. Show the summary adjustments on December 31, 20X0, for the period May 1 to December 31. Prepare an analysis of the transaction that takes place on May 1, 20X1, when Miller repays its obligation.

2. Prepare adjusting journal entries for Bank of America and Miller on December 31, 20X0.

3. Prepare the entries that Bank of America and Miller would make on May 1, 20X1 when the loan and interest is repaid. These entries should include interest that accumulates between January 1, 20X1, and May 1, 20X1.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...