Various liabilities
• LO13–1 through LO13–4
The unadjusted
Accounts receivable | $ 92,500 |
Accounts payable | 35,000 |
Bank notes payable | 600,000 |
Mortgage note payable | 1,200,000 |
Other information:
a. The bank notes, issued August 1, 2018, are due on July 31, 2019, and pay interest at a rate of 10%, payable at maturity.
b. The mortgage note is due on March 1, 2019. Interest at 9% has been paid up to December 31 (assume 9% is a realistic rate). Manufacturing intended at December 31, 2018, to refinance the note on its due date with a new 10-year mortgage note. In fact, on March 1, Manufacturing paid $250,000 in cash on the principal balance and refinanced the remaining $950,000.
c. Included in the accounts receivable balance at December 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $18,000. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases.
d. On November 1, 2018, Manufacturing rented a portion of its factory to a tenant for $30,000 per year, payable in advance. The payment for the 12 months ended October 31, 2019, was received as required and was credited to rent revenue.
Required:
1. Prepare any necessary
2. Prepare the current and long-term liability sections of the December 31, 2018,
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Intermediate Accounting
- Required information Exercise 7-5 (Algo) Notes payable—discount basis LO 2 Skip to question [The following information applies to the questions displayed below.] On April 15, 2019, Powell Inc. obtained a six-month working capital loan from its bank. The face amount of the note signed by the treasurer was $255,400. The interest rate charged by the bank was 5.00%. The bank made the loan on a discount basis. Exercise 7-5 (Algo) Part a - Horizontal model a-2. Use the horizontal model to show the effect of signing the note and the receipt of the cash proceeds on April 15, 2019. Indicate the financial statement effect. (Enter decreases with a minus sign to indicate a negative financial statement effect.)arrow_forwardRequired information Exercise 7-5 (Algo) Notes payable—discount basis LO 2 Skip to question [The following information applies to the questions displayed below.] On April 15, 2019, Powell Inc. obtained a six-month working capital loan from its bank. The face amount of the note signed by the treasurer was $255,400. The interest rate charged by the bank was 5.00%. The bank made the loan on a discount basis. Exercise 7-5 (Algo) Part a - Journal entry a-3. Record the journal entry to show the effect of signing the note and the receipt of the cash proceeds on April 15, 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forwardNote Payable and Accrued Interest Fairbome Company borrowed $60,000 on an 8%, interest-bearing note on October 1, 2019. Fairborne ends its fiscal year on December 31. The note was paid with interest on May 1, 2020. Required: 1. Prepare the entry for this note on October 1, 2019. 2. Prepare the adjusting entry for this note on December 31, 2019. 3. Indicate how the note and the accrued interest would appear in the balance sheet at December 31, 2019. 4. Prepare the entry to record the repayment of the note on May 1, 2020.arrow_forward
- Note Payable and Accrued Interest Ellsworth Enterprises borrowed $425,000 on an 8%, interest-bearing note on September 30, 2020. Ellsworth ends its fiscal year on December 31. The note was paid with interest on March 31, 2021. Required: 1. Prepare the entry for this note on September 30, 2020. 2. Prepare the adjusting entry for this note on December 31, 2020. 3. Indicate how the note and the accrued interest would appear on the balance sheet at December 31, 2020. 4. Prepare the entry to record the repayment of the note on March 31, 2021.arrow_forward15 16 Master Designs Decorators issued a 180-day, 6% note for $75,000, dated May 14, 2019, to Morgan Furniture Company on account. Required: A. Determine the due date of the note. B. Determine the maturity value of the note. C. Journalize the entries to record the following: (1) receipt of the note by Morgan Furniture and (2) receipt of payment of the note at maturity. 1 2 4 5 6 Date GENERAL JOURNAL Description Post ref Debit Page 16 17 Credit KUTEN 2 3 4 5arrow_forwardJournalizing note receivable transactions including a dishonored note On September 30, 2018, Team Bank loaned $94,000 to Kendall Warner on a one-year, 6% note. Team’s fiscal year ends on December 31. Requirements Journalize all entries for Team Bank related to the note for 2018 and 2019. Which party has a a. note receivable? b. note payable? c. interest revenue? d. interest expense? 3. Suppose that Kendall Warner defaulted on the note. What entry would Team record for the dishonored note?arrow_forward
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