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ACCT 3410: Homework Assignment #1 Exercise 13-2: A. Prepare journal entries for each of the transactions.

September 1, 2008: Dr. Purchases $50,000 Cr. Accounts Payable $50,000 (To record purchase of inventory) October 1, 2008: Dr. Accounts Payable $50,000 Cr. Note Payable $50,000 (To record issuance of note to cover A/P) October 1, 2008: Dr. Cash $50,000 Dr. Discount on Note Payable $6,000 Cr. Note Payable $56,000 (To record borrowing of non-interest bearing note) B. Prepare adjusting entries at December 31, 2008 Dr. Interest Expense $1,500 Cr. Interest Payable $1,500 (To accrue interest on interest bearing note: $50,000 X 12% X 3/12) Dr. Interest Expense $1,500 Cr. Discount on Note Payable $1,500 (To accrue interest on non-interest bearing note: $6,000 X 3/12) C. Calculate the net liability, in total, to be reported on the December 31, 2008, balance sheet for the following: 1. The interest-bearing note: Initial Liability Recorded: Account Payable $50,000 Converted Account Payable to Note Payable ($50,000) AP Note Payable $50,000 Add: Interest Payable $1,500 Net Liability to be reported $51,500 2. The non-interest-bearing note: Initial Liability Recorded: Notes Payable $56,000 Less: Discount on notes Payable ($6,000) Add: Recognition of Interest in period $1,500 Net Liability to be reported $51,500

D. Prepare the journal entries for the payment of the notes at maturity. 1. The interest-bearing note: October 1, 2009: Dr. Notes Payable $50,000 Dr. Interest Payable $1,500 Dr. Interest Expense $4,500 Cr. Cash $56,000 2. The non-interest-bearing note: October 1, 2009: Dr. Note Payable $56,000 Dr. Interest Expense $4,500 Cr. Cash $56,000 Cr. Discount on Note Payable $4,500 E. Repeat part (d) assuming that the company uses reversing entries (show the reversing entries at January 1, 2009). Would the use of reversing entries be efficient for both types of notes? Exercise 13-19: Transaction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Assets I NE NE I NE I D NE NE NE NE NE NE D I D NE NE I I Liabilities I NE I I D I I I I NE I I I NE I D D I I D Owner s Equity NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE NE Net Income NE NE D NE D I D D D NE D D D D I NE I D NE I

1. Dr. Merchandise Inventory $80,000 Cr. Accounts Payable $80,000 2. Dr. Accounts Payable $80,000 Cr. Note Payable $80,000 3. Dr. Interest Expense XXX Cr. Interest Payable XXX 4. Dr. Cash $100,000 Dr. Discount on Note Payable $12,000 Cr. Note Payable $112,000 5. Dr. Interest Expense $8,000 Cr. Discount on Note Payable $8,000 6. Dr. Cash $75,260 Cr. Sales $71,000 Cr. Sales Tax Payable $4,260 7. Dr. Wage Expense $35,000 Cr. Cash $25,000 Cr. Various Amounts Payable $10,000 8. Dr. Payroll Tax Expense XXX Cr. CPP, EI Premiums Payable XXX 9. Dr. Wage Expense XXX Cr. Vacation Wages Payable XXX 10. Disclose in notes 11. Dr. Employees Bonus Expense XXX Cr. Bonus Payable XXX 12. Dr. Lawsuit Loss Expense XXX Cr. Lawsuit Liability Payable XXX 13. Dr. Warranty Expense Cr. Estimated Liability under Warranty 14. Dr. Warranty Expense Cr. Cash/Inventory/Accrued Payroll 15. Dr. Cash Cr. Sales Cr. Unearned Warranty Revenue

16. Dr. Unearned Warranty Revenue Cr. Cash 17. Dr. Unearned Warranty Revenue Cr. Warranty Revenue 18. Dr. Premium or Loyalty Program Expense Cr. Estimated Liability for Premiums 19. Dr. Cash Cr. Unearned Revenue 20. Dr. Cash Dr. Unearned Revenue Cr. Revenue

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