Magnesita has the following transactions related to liabilitiesin December 2017 and January 2018. Magnesita’s fiscal year end isDecember 31. Its financial statements are issued in April. 2017 Dec1 Negotiated a revolving credit agreement with Deutsche Bank thatcan be renewed annually upon bank approval. The amount availableunder the line of credit is $20 million at the Bank’s prime rate.Dec 15 Arranged a three-month bank loan of $5 million with DeutscheBank under the line of credit agreement. Interest at the prime rateof 10% was payable at maturity. Dec 20 Received $200,000 from NucorCorporation towards the purchase of a $1.2 million order to bedelivered on January 15. Dec 24 Sold $750,000 worth of bricks onaccount to US Steel. The state sales tax is 5% and local sales taxis 2%. Dec 24 The bricks carry a one-year warranty. Based on pastexperience, Magnesita estimates that warranty costs approximate 1%of sales. Dec 25 Received $12,000 refundable deposit from US Steelrelating to containers used to transport bricks. Dec 31 Record anynecessary adjusting entry(s) 2018 (Continues on next page) Jan 6Half of the containers (from Dec 24) were returned. Jan 8 Magnesitaincurred warranty costs of $12,000 related to the brick sales fromDec 24. Jan 27 Magnesita determined that the remaining containers(from Dec 24) will not be returned. The original cost of thecontainers to Magnesita was $4,000.
