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3 years ago

Problem 8-2A Record notes payable and notes receivable (LO2)

Business

1 answer:

Finger [1]3 years ago

5 0

Answer:

1. Prepare the journal entries on October 1, 2015, to record the issuance of the note.

Journal entry for Precision Castparts

Dr Cash 40,600,000

Cr Notes payable 40,600,000

Journal entry for Midwest Bank

Dr Notes receivable 40,600,000

Cr Cash 40,600,000

2. Record the adjustment on December 31, 2015.

Journal entry for Precision Castparts

Dr Interest expense 812,000

Cr Interest payable 812,000

Journal entry for Midwest Bank

Dr Interest receivable 812,000

Cr Interest revenue 812,000

3. Prepare the journal entry on September 30, 2016, to record payment of the notes payable at maturity

Journal entry for Precision Castparts

Dr Notes payable 40,600,000

Dr Interest expense 2,436,000

Dr Interest payable 812,000

Cr Cash 43,848,000

Journal entry for Midwest Bank

Dr Cash 43,848,000

Cr Notes receivable 40,600,000

Cr Interest receivable 812,000

Cr Interest revenue 2,436,000

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One single payment of money, opposed to a an annuity. (a series of payments made over time)

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3 years ago

Sheffield Corp. earned $2120 for architecture services provided with the fee to be paid in the future. No entry was made at the

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Answer: If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause: "d. revenues to be understated.".

Explanation: The income would be underestimated because the income of $2120 that corresponds to the service provided in the accounting period, must be recognized in the accounting period in which the economic events occur regardless of when the income of the funds occurs (accrual principle).

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3 years ago

Partnership records show the following capital balances at the date of Hopkin's withdrawal: M. Hammel, $80,000; D. Hopkins, $210

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Answer:

Dr D. Hopkins, Capital 210,000

Cr P. Houghton, Capital 10,000

Cr M. Hammel, Capital 10,000

Cr Cash 230,000

Explanation:

Preparation of the December 31 journal entry for the partnership.

Based on the information given the December 31 journal entry for the partnership will be :

Dr D. Hopkins, Capital 210,000

Cr P. Houghton, Capital 10,000

(100,000-80,000/2)

Cr M. Hammel, Capital 10,000

(100,000-80,000/2)

Cr Cash 230,000

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3 years ago

Flint Corporation issues $440,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the mar

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Answer:

$414,282.91

Explanation:

The issue price of the bonds is also known as the Present Value (PV) or current price of the Bonds and is calculated as :

FV = $440,000

PMT = ($440,000 x 9%) ÷ 2 = $19,800

P/yr = 2

N = 9 x 2 = 18

I/yr = 10%

PV = ?

Using a Financial calculator to input the values as above, the PV or issue price will be $414,282.91

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3 years ago

Turquoise, Inc. is trying to decide whether to purchase identical inventory from one of the following suppliers: Supplier A Supp

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Answer:

Actual Cost of Supplier A: $291.60

Actual Cost of Supplier B: $271.60

Explanation:

<u>Supplier A:</u>

Cost - 270

Shipping FOB shipping point

Purchase Discount = Invoice Price * Discount

For Supplier A, the invoice price is 270 and discount is 2/10 = 2%, so:

Purchase Discount = 270 * 0.02 = $5.4

Cost is:

270 + 27(shipping FOB point) - 5.4 = $291.60

<u>Supplier B:</u>

Cost - 280

Shipping Destination (so 0)

Purchase Discount = Invoice Price * Discount

For Supplier B, the invoice price is 280 and discount is 3%, so:

Purchase Discount = 280 * 0.03 = $8.4

Cost is:

280 - 8.4 = $271.60

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3 years ago