During the fiscal year ended December 31, Swanlee Corporation engaged in the following trans- actions involving notes payable: July 1 Borrowed $20,000 from Weston Bank, signing a 90-day, 12 percent note payable. Sept. 16 Purchased office equipment from Moontime Equipment. The invoice amount was $30,000, and Moontime agreed to accept, as full payment, a 10 percent, three-month note for the invoice amount. Oct. 1 Paid Weston Bank the note plus accrued interest. Dec. 1 Borrowed $100,000 from Jean Will, a major corporate stockholder. The corporation issued Will a $100,000, 9 percent, 120-day note payable. Dec. 1 Purchased merchandise inventory in the amount of $10,000 from Listen Corporation. Listen accepted a 90-day, 12 percent note as a full settlement of the purchase. Swanlee Corporation uses a perpetual inventory system. Dec. 16 The $30,000 note payable to Moontime Equipment matured today. Swanlee paid the accrued interest on this note and issued a new 60-day, 16 percent note payable in the amount of $30,000 to replace the note that matured. Instructions a. Prepare journal entries (in general journal form) to record the above transactions. Use a 360-day year in making the interest calculations. b. Prepare the adjusting entry needed at December 31, prior to closing the accounts. Use one entry for all three notes (round to the nearest dollar). c. Provide a possible explanation why the new 60-day note payable to Moontime Equipment pays 16 percent interest instead of the 10 percent rate charged on the September 16 note.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
During the fiscal year ended December 31, Swanlee Corporation engaged in the following trans-
actions involving notes payable:
July 1 Borrowed $20,000 from Weston Bank, signing a 90-day, 12 percent note payable.
Sept. 16 Purchased office equipment from Moontime Equipment. The invoice amount was
$30,000, and Moontime agreed to accept, as full payment, a 10 percent, three-month
note for the invoice amount.
Oct. 1 Paid Weston Bank the note plus accrued interest.
Dec. 1 Borrowed $100,000 from Jean Will, a major corporate stockholder. The corporation
issued Will a $100,000, 9 percent, 120-day note payable.
Dec. 1 Purchased merchandise inventory in the amount of $10,000 from Listen Corporation.
Listen accepted a 90-day, 12 percent note as a full settlement of the purchase. Swanlee
Corporation uses a perpetual inventory system.
Dec. 16 The $30,000 note payable to Moontime Equipment matured today. Swanlee paid the
accrued interest on this note and issued a new 60-day, 16 percent note payable in the
amount of $30,000 to replace the note that matured.
Instructions
a. Prepare
360-day year in making the interest calculations.
b. Prepare the
entry for all three notes (round to the nearest dollar).
c. Provide a possible explanation why the new 60-day note payable to Moontime Equipment
pays 16 percent interest instead of the 10 percent rate charged on the September 16 note.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
