Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 3, Problem 13P
Reversing Entries Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction.
- 1. On November 1, it purchased land at a cost of $8,000. It made a $2,000 down payment and signed a note payable agreeing to pay the $6,000 balance in 6 months plus interest at an annual rate of 10%.
- 2. On December 1, it accepted a $4,200, 3-month, 12% (annual interest rate) note receivable from a customer for the sale of merchandise. On December 31, Thomas made the following related adjustments:
Required:
- 1. Assuming that Thomas uses reversing
entries, prepare journal entries to record:- a. the January 1, reversing entries
- b. the March 1, $4,326 collection of the note receivable
- c. the May 1, $6,300 payment of the note payable
- 2. Assuming instead that Thomas does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable.
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Students have asked these similar questions
Leach Company borrowed $95,000 cash by issuing a note payable on June 1, Year 1. The note had an 6 percent annual rate of interest
and a one-year term to maturity.
Required:
a. What amount of interest expense will Leach recognize for the year ending December 31, Year 1?
b. Record the issue of notes payable and recognition of interest on December 31, Year 1, in the accounting equation for Year 1.
c. What amount of cash will Leach pay for interest expense in Year 1?
d. What is the amount of interest payable as of December 31, Year 1?
e. What amount of cash will Leach pay for interest expense in Year 2?
f. What amount of interest expense will Leach recognize in Year 2?
g. What is the amount of interest payable as of December 31, Year 2?
-
Anne Taylor Company borrowed cash on August 1 of Year 1, by signing a $19,980 (face amount), one-year note payable, due on July 31 of Year 2. The
accounting period of Anne Taylor ends December 31. Assume an effective interest rate of 11%.
a. How much cash should Anne Taylor Company receive from the note on August 1 of Year 1, assuming the note is an interest-bearing note?
$ 0
b. Provide the following entries and reporting amounts:
1. August 1 of Year 1, date of the loan.
2. December 31 of Year 1, adjusting entry.
3. July 31 of Year 2, payment of the note.
⚫Note: Round your answers to the nearest whole dollar.
Date
1. Aug. 1, Year 1
Account Name
Dr.
Cr.
0
0
0
0
To record issue of note.
2. Dec. 31, Year 1
0
0
To record year-end adjusting entry.
3. July 31, Year 2
0
O O
0 0
0
0
0
0
0
00
0
0
To record payment of note.
c. What liability amounts should be shown on the December 31 of Year 1 balance sheet?
Balance Sheet, Dec. 31
Year 1
Current liabilities
Note Payable
0
$
0
d. Answer (a) and…
Record these transactions in general journal ledger:
Dec 1: Purchased equipment costing $15,608 by taking out a 4-month installment note with First Bank.
Dec 4: Accepted a sales return from Eastern for an item having an original gross sales price of $6,000. The original sale to Eastern occurred in November with terms 2/15, n/30.
Dec 5: Specifically wrote off the receivable balance owed by Baker as uncollectible.
Dec 7: Returned defective inventory with a gross cost of $4,000 back to Hunt Corp.
Dec 14: Wilson returned an item originally purchased on Dec 12 with a gross sales price of $7,000.
Dec 14: Returned inventory with a gross cost of $2,000 back to Nelson Industries.
Dec 18: Bought office supplies on account for $9,000 from Staples Inc. (open a new Accounts Payable in the subsidiary ledger--Vendor # 210-30). Invoice # is OM1218. Staples Inc.’s terms are n/30
Dec 19: Received the December utilities bill for the amount of $15,000. The bill will be paid in January of next year.…
Chapter 3 Solutions
Intermediate Accounting: Reporting And Analysis
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