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Semmy [17]
2 years ago
15

On June 30, 2018, the Esquire Company sold some merchandise to a customer for $48,000. In payment, Esquire agreed to accept a 9%

note requiring the payment of interest and principal on March 31, 2019. The 9% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2018 interest accrual, and the March 31, 2019 collection. 2. If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2018 and 2019
Business
1 answer:
emmainna [20.7K]2 years ago
6 0

Answer:

Esquire Company

1. Journal Entries

June 30, 2018:

Debit 9% Notes Receivable $48,000

Credit Sales Revenue $48,000

To record the sale of goods on account.

December 31, 2018:

Debit Interest Receivable $2,160

Credit Interest Revenue $2,160

To accrue interest revenue ($48,000 * 9% * 6/12).

March 31, 2019:

Debit Interest Receivable $1,080

Credit Interest Revenue $1,080

To accrue interest revenue  ($48,000 * 9% * 3/12).

March 31, 2019:

Debit Cash $51,240

Credit Notes Receivable $48,000

Credit Interest Receivable $3,240

To record the collection of cash for goods and accruing interest.

2. If the December 31 adjusting entry for the interest accrual is not prepared, income before income taxes will be understated in 2018 and overstated in 2019 by $2,160.

Explanation:

a) Data and Analysis:

June 30, 2018: 9% Notes Receivable $48,000 Sales Revenue $48,000

December 31, 2018: Interest Receivable $2,160 Interest Revenue $2,160

March 31, 2019: Interest Receivable $1,080 Interest Revenue $1,080

March 31, 2019: Cash $51,240 Notes Receivable $48,000 Interest Receivable $3,240

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Marlow Company purchased a point of sale system on January 1 for $5,800. This system has a useful life of 5 years and a salvage
xz_007 [3.2K]

Answer: $1392

Explanation:

The depreciation rate under straight line is =1/5=0.2

The depreciation rate under double declining is = 0.2 × 2 = 0.4

Depreciation expense for the first year = 0.4 × $5800 = $2320.

At the beginning of year two, net book value = $5800 - $2320 = $3480

Depreciation expense for year two = 0.4 × $3480 = $1392

7 0
3 years ago
A company purchases merchandise with a catalog price of $30,000. The company receives a 40% trade discount from the seller. The
Svet_ta [14]

Answer:

$17,820

Explanation:

Data provided in the question:

Catalog price of the merchandise = $30,000

Trade discount received = 40%

The amount of discount received = 40% of $30,000

= 0.4 × $30,000

= $12,000

Therefore,

Cost of Merchandise = Catalog price - Discount

= $30,000 - $12,000

= $18,000

also,

credit terms = 1/10, n/30

since, the payment was made within the discount period

1% of discount will be provided

thus,

amount of discount = 1% of cost of merchandise

= 0.01 × $18,000

= $180

hence,

Net cost of the merchandise

= Cost of merchandise - Discount on credit terms

= $18,000 - $180

= $17,820

3 0
3 years ago
In the framework of monopolistic competition, which of the following is not a possible outcome for a firm that runs a successful
castortr0y [4]

Answer:

The correct answer is A)

Explanation:

When products and or services are manufactured at a level that maximizes social welfare, allocative efficiency is said to have occurred.

A market system characterized as monopolistic competition may <u><em>never </em></u>achieve productive efficiency because firms often fix prices at a point higher than their marginal costs.

Marginal cost refers to the added cost incurred by producing or manufacturing one additional unit of a product.

Cheers!  

5 0
3 years ago
Caspian Sea is considering raising $33.00 million by issuing preferred stock. They believe the market will use a discount rate o
Hitman42 [59]

Answer:

1,212,723 shares

Explanation:

Given that,

Value of issuing preferred stock = $33,000,000

Discount rate = 11.87%

Dividend paid = $3.23

Price of preferred stock:

= Annual dividend ÷ discount rate

= $3.23 ÷ 0.1187

= $27.2115

Shares will they need to issue:

= Value of issuing preferred stock ÷ Price of preferred stock

= $33,000,000 ÷ $27.2115

= 1,212,723

3 0
3 years ago
Consider relative purchasing power parity (PPP) and remember the consumer price index (CPI) provides the price level in a countr
pychu [463]

Answer:

0.7156 USD/CAD

Explanation:

Relationship between relative PPP and inflation rates can be expressed as given below:

S(1)/S(0) = (1+I(y)) / (1+I(x))................(1)

==> S(0) = spot exchange rate at the beginning of the time period

==> S(1)  = spot exchange rate at the end of the time period

==> I(y) = expected inflation rate for country y, which is foreign country

==> I(x) = expected inflation rate for country x, which is domestic country.

Here, assumes that the US is a foreign country and Canada is domestic country

I(y) = (200/165) - 1 = 21.21%

I(x) = (220/170) - 1 = 29.41%

On putting the values of I(x) and I(y) in the first equation, we get:

S(1)/0.764 = (1+0.2121) / (1+0.2941)

S(1)/0.764 = 0.9366354996

S(1) = 0.764*0.936635

S(1) = 0.7156 USD/CAD

If relative PPP holds, the spot exchange rate in 2015 will be 0.7156 USD/CAD

4 0
3 years ago
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