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VARVARA [1.3K]
3 years ago
8

On november 1, 2018, the bagel factory signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued inter

est due six months later on may 1, 2019. the bagel factory records the appropriate adjusting entry for the note on december 31, 2018. in recording the payment of the note plus accrued interest at maturity on may 1, 2019, the bagel factory would:
a) debit interest expense, $1000

b) debit interest payable , $2000

c) debit interest expense, $3000

d) debit interest expense , $2000
Business
1 answer:
Salsk061 [2.6K]3 years ago
6 0

Answer:

A) debit interest expense, $1000

Explanation:

to determine the accrued interest expense = $100,000 x 6% x 2/12 = $1,000

the journal entry should be:

December 31, 2018, accrued interest expense on note payable:

Dr Interest expense 1,000

    Cr Accrued interest payable 1,000

Accrual accounting establishes that expenses must be recognize during the period that they occur regardless of when they are paid. So we must recognize 2 months worth of interest.

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Answer:

a. What is the effect of this transaction on this year's and next year's income statement and income tax expense? Why?

The inventory account is a permanent asset account in the balance sheet, so it doesn't matter if the company purchases all that it can during the last days of December, it will not affect the income statement, nor their tax liability for the current year. A company only recognizes cost of goods sold when the goods are actually sold, not when they are purchased.

Since the company uses the LIFO (last in, first out) inventory method, all it will do is increase the value of ending inventory which changes into beginning inventory next year. You can reduce next year's income more by purchasing the goods next year.

b. If R. J. Graziano Wholesale had been using the FIFO method of inventory costing, would the president give the same directive?

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It is useless, and he should know it. The only implication is that this will help him realize his low IQ.

6 0
2 years ago
Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's
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Answer:

Total E&P = $ 160000

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Reduction of E& P due to exchange = Total E&P*Total voting Right Sold

Reduction of E& P due to exchange = 160000*25%

Reduction of E& P due to exchange = 40000

Reduction of E& P Lower of Total E&P*Total voting Right Sold or Amount realised

Reduction of E& P Lower of 40000 or (50*1000)

Reduction of E& P Lower of 40000 or 50000

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7 0
3 years ago
If an employer does not offer a retirement plan, what might be another way to save for retirement?
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3 years ago
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Nana76 [90]

Answer:

d) 34.17

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8 0
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Explanation:

7 0
3 years ago
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