Concept explainers
Eddie Edwards and Phil Bell own and operate The Second Hand Equipment Shop. The following transactions involving notes and interest were completed during the last three months or 20--:
REQUIRED
- 1. Prepare general
journal entries for the transactions. - 2. Prepare necessary
adjusting entries for the notes outstanding on December 31.
1.
Prepare journal entry to record the following transactions.
Explanation of Solution
Note receivable:
Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or, borrower to the lender or creditor. Notes receivable is an asset of a business.
Prepare journal entry to record the following transactions.
Date | Account titles and Explanation | Debit | Credit |
October 1 | Purchases | $6,800 | |
Notes payable | $6,800 | ||
(To record note issued for inventory purchases) | |||
October 15 | Notes receivable | $2,000 | |
Sales | $2,000 | ||
(To record note received for merchandise for sale) | |||
November 1 | Cash (1) | $2,003.11 | |
Notes receivable | $2,000 | ||
Interest revenue (2) | $3.11 | ||
(To record discount on notes receivable) | |||
November 1 | Cash (4) | $4,925 | |
Discount on notes payable (3) | $75 | ||
Notes payable | $5,000 | ||
(To record issued note for bank loan) | |||
November 20 | Notes receivable | $4,000 | |
Accounts receivable - L.R | $4,000 | ||
(To record received note to settle account) | |||
November 30 | Notes payable | $6,800 | |
Interest expense (5) | $56.67 | ||
Cash | $6,856.67 | ||
(To record paid note with interest at maturity) | |||
December 10 | Accounts payable - RT | $3,000 | |
Notes payable | $3,000 | ||
(To record issued note to settle account) | |||
December 16 | Accounts receivable - R.C (6) | $2,040 | |
Cash | $2,040 | ||
(To record paid bank for dishonoured note) |
Table (1)
Working notes:
(1) Calculate cash proceeds.
(2) Calculate interest expense.
(3) Calculate discount on notes payable.
(4) Calculate cash proceeds.
(5) Calculate interest expenses.
(6) Calculate accounts receivable.
2.
Prepare adjusting entries for the notes outstanding on 31st December.
Explanation of Solution
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.
Prepare adjusting entries for the notes outstanding on 31st December.
Date | Account titles and Explanation | Debit | Credit |
December 31 | Interest expense (7) | $50 | |
Discount on notes payable | $50 | ||
(To record adjusting entry for interest expense) | |||
December 31 | Interest expense (8) | $10.50 | |
Accrued interest payable | $10.50 | ||
(Record adjusting entry for interest expense) | |||
December 31 | Accrued interest receivable | $29.61 | |
Interest revenue (9) | $29.61 | ||
(To record adjusting entry for interest revenue) |
Table (2)
Working notes:
(7) Calculate interest expense.
(8) Calculate interest expense.
(9) Calculate interest revenue.
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Chapter 17 Solutions
Study Guide With Working Papers For Heintz/parry's College Accounting, Chapters 1-15, 22nd
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- The following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. Jan. 2Issued Ck. No. 6981 to JSS Management Company for monthly rent, 775. 2J. Hammond, the owner, invested an additional 3,500 in the business. 4Bought merchandise on account from Valencia and Company, invoice no. A691, 2,930; terms 2/10, n/30; dated January 2. 4Received check from Vega Appliance for 980 in payment of 1,000 invoice less discount. 4Sold merchandise on account to L. Paul, invoice no. 6483, 850. 6Received check from Petty, Inc., 637, in payment of 650 invoice less discount. 7Issued Ck. No. 6982, 588, to Fischer and Son, in payment of invoice no. C1272 for 600 less discount. 7Bought supplies on account from Doyle Office Supply, invoice no. 1906B, 108; terms net 30 days. 7Sold merchandise on account to Ellison and Clay, invoice no. 6484, 787. 9Issued credit memo no. 43 to L. Paul, 54, for merchandise returned. 11Cash sales for January 1 through January 10, 4,863.20. 11Issued Ck. No. 6983, 2,871.40, to Valencia and Company, in payment of 2,930 invoice less discount. 14Sold merchandise on account to Vega Appliance, invoice no. 6485, 2,050. Jan. 18Bought merchandise on account from Costa Products, invoice no. 7281D, 4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, 147 (total 5,001). 21Issued Ck. No. 6984, 194, to M. Miller for miscellaneous expenses not recorded previously. 21Cash sales for January 11 through January 20, 4,591. 23Issued Ck. No. 6985 to Forbes Freight, 96, for freight charges on merchandise purchased on January 4. 23Received credit memo no. 163, 376, from Costa Products for merchandise returned. 29Sold merchandise on account to Bruce Supply, invoice no. 6486, 1,835. 31Cash sales for January 21 through January 31, 4,428. 31Issued Ck. No. 6986, 53, to M. Miller for miscellaneous expenses not recorded previously. 31Recorded payroll entry from the payroll register: total salaries, 6,200; employees federal income tax withheld, 872; FICA Social Security tax withheld, 384.40, FICA Medicare tax withheld, 89.90. 31Recorded the payroll taxes: Social Security tax, 384.40, FICA Medicare tax, 89.90; state unemployment tax, 334.80; federal unemployment tax, 37.20. 31Issued Ck. No. 6987, 4,853.70, for salaries for the month. 31J. Hammond, the owner, withdrew 1,000 for personal use, Ck. No. 6988. Required 1. Record the transactions for January using a sales journal, page 73; a purchases journal, page 56; a cash receipts journal, page 38; a cash payments journal, page 45; and a general journal, page 100. Assume the periodic inventory method is used. 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily those entries involving the Other Accounts columns and the general journal to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Add the columns of the special journals and prove the equality of the debit and credit totals. 6. Post the appropriate totals of the special journals to the general ledger. 7. Prepare a trial balance. 8. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forwardThe following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. Jan. 2Issued Ck. No. 6981 to JSS Management Company for monthly rent, 775. 2J. Hammond, the owner, invested an additional 3,500 in the business. 4Bought merchandise on account from Valencia and Company, invoice no. A691, 2,930; terms 2/10, n/30; dated January 2. 4Received check from Vega Appliance for 980 in payment of 1,000 invoice less discount. 4Sold merchandise on account to L. Paul, invoice no. 6483, 850. 6Received check from Petty, Inc., 637, in payment of 650 invoice less discount. 7Issued Ck. No. 6982, 588, to Fischer and Son, in payment of invoice no. C1272 for 600 less discount. 7Bought supplies on account from Doyle Office Supply, invoice no. 1906B, 108; terms net 30 days. 7Sold merchandise on account to Ellison and Clay, invoice no. 6484, 787. 9Issued credit memo no. 43 to L. Paul, 54, for merchandise returned. 11Cash sales for January 1 through January 10, 4,863.20. 11Issued Ck. No. 6983, 2,871.40, to Valencia and Company, in payment of 2,930 invoice less discount. 14Sold merchandise on account to Vega Appliance, invoice no. 6485, 2,050. Jan. 18Bought merchandise on account from Costa Products, invoice no. 7281D, 4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, 147 (total 5,001). 21Issued Ck. No. 6984, 194, to M. Miller for miscellaneous expenses not recorded previously. 21Cash sales for January 11 through January 20, 4,591. 23Issued Ck. No. 6985 to Forbes Freight, 96, for freight charges on merchandise purchased on January 4. 23Received credit memo no. 163, 376, from Costa Products for merchandise returned. 29Sold merchandise on account to Bruce Supply, invoice no. 6486, 1,835. 31Cash sales for January 21 through January 31, 4,428. 31Issued Ck. No. 6986, 53, to M. Miller for miscellaneous expenses not recorded previously. 31Recorded payroll entry from the payroll register: total salaries, 6,200; employees federal income tax withheld, 872; FICA Social Security tax withheld, 384.40, FICA Medicare tax withheld, 89.90. 31Recorded the payroll taxes: Social Security tax, 384.40, FICA Medicare tax, 89.90; state unemployment tax, 334.80; federal unemployment tax, 37.20. 31Issued Ck. No. 6987, 4,853.70, for salaries for the month. 31J. Hammond, the owner, withdrew 1,000 for personal use, Ck. No. 6988. Required 1. Record the transactions in the general journal for January. If you are using Working Papers, start with page 1 in the journal. Assume the periodic inventory method is used. The chart of accounts is as follows: 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily the general journal entries to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Prepare a trial balance. 6. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forwardThe following accounts appear in the ledger of Celso and Company as of June 30, the end of this fiscal year. The data needed for the adjustments on June 30 are as follows: ab.Merchandise inventory, June 30, 54,600. c.Insurance expired for the year, 475. d.Depreciation for the year, 4,380. e.Accrued wages on June 30, 1,492. f.Supplies on hand at the end of the year, 100. Required 1. Prepare a work sheet for the fiscal year ended June 30. Ignore this step if using CLGL. 2. Prepare an income statement. 3. Prepare a statement of owners equity. No additional investments were made during the year. 4. Prepare a balance sheet. 5. Journalize the adjusting entries. 6. Journalize the closing entries. 7. Journalize the reversing entry as of July 1, for the wages that were accrued in the June adjusting entry. Check Figure Net income, 14,066arrow_forward
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