EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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a. Beauty of the Sea purchased inventory from a large supplier. The supplier offered a credit term of 3/10, n/30. Indicate whether this debt is an example of account payable, long-term or short-term debt.
b. Adoptions and More drew on 8 annual notes totaling $250,000 to be paid upon completion of the office it is building. The company intends to pay $75,000 next year. What is that portion considered?
10. Serene Company purchases fountains for its inventory from Kirkland Inc. The following
transactions take place during the current year.
A. On July 3, the company purchases thirty fountains for $3114 per fountain, on credit.
Terms of the purchase are 2/10, n/30, invoice dated July 3.
B. On August 3, Serene does not pay the amount due and renegotiates with Kirkland.
Kirkland agrees to convert the debt owed into a short-term note, with an 8% annual
interest rate, payable in two months from August 3.
C. On October 3, Serene Company pays its account in full.
Record the journal entries to recognize the initial purchase, the conversion, and the payment.
6. During 2019, Reed Corporation sold merchandise for a total of $900,000. The cost of merchandise to
Reed was $675,000. Reed offers credit terms of 1/10, n/30 to encourage early payment. At year-end,
there are $22,500 of sales still eligible for the 1% discount. Reed believes that all of the companies will
pay within the discount period to receive the 1% discount. Assume Reed's fiscal year is December 31.
Reed's adjusting journal entry will include:
A) A debit to Sales Discounts for $225
B) A credit to Allowance for Sales Discounts for $2,250
C) A debit to Sales Discounts for $2,050
D) A credit to Sales Discounts for $225
E) No adjusting journal entry is required. Discount will be recognized when payment is received.
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- Gatsby, Inc. owed $500,000 on account for inventory purchased on November 1, 2020. The company's fiscal year ends on December 31. Gatsby was unable to pay the amount owed by February 1, 2021 due date because of financial difficulties experienced in early 2021. On February 1, 2021, it signed a $500,000, 10% interest- bearing note. This note was repaid with interest on September 1, 2021. How much interest should Gasby recognize on September 1, 2021 (enter your answer in whole dollars, no comma or dollar sign)?arrow_forwardOn the 20th June 2023, Proton Motors Ltd sold inventories costing $120,000 to Electron Ltd for $100,000 on credit. At year-end, 70% of these goods remained in Electron Ltd’s closing inventory. Electron Ltd paid the outstanding balance to Proton Motors Ltd on 5th July 2023. We have recognized a loss of $20,000 from the sale which has reduced our taxes. Is there anything else we need to do?arrow_forwardDaniels Company engaged in the following transactions during 2020: a. Purchased $25,000 of merchandise from XYZ Supplies on January 26. Amount due in full on February 28. b. Paid for 40% of the purchased merchandise (Transaction a) on February 26. c. On February 28, negotiate a payment extension with XYZ for the remainder of the balance from the January 26 purchase by signing a 1-year, 8% note. d. Borrowed $500,000 on an 8-month, 9% interest-bearing note on July 31. e. Purchased $140,000 of merchandise on August 2. Amount due in full on September 30. f. Paid for the purchased merchandise (Transaction e) on September 28. g. Received from Martel Inc. on October 4, a $60,000 deposit against a total selling price of $600,000 for services to be performed for Martel. h. Paid quarterly installments of Social Security, Medicare, and individual income tax withholdings, as shown below, on October 10. The Social Security and Medicare were previously recorded as expenses during…arrow_forward
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