The following items were selected from among the transactions completed by Trainor Equipment Ltd., a company with a May 31 year-end.
2015
Jul. 10. Purchased equipment on account from Wholesalers Co., $225,000, terms 1/10, n/30. Trainor Equipment Ltd. uses the perpetual inventory method.
Jul. 16. Borrowed $550,000 from Central Credit Union, issuing a 180-day, 4% note.
Jul. 20. Paid Wholesalers Co. for the amount owed on the July 10 transaction.
2016
Jan. 1. Issued $40,000,000 of 10-year, 6% bonds at an effective interest rate of 5%, receiving cash of $43,117,792. Interest on the bonds is payable semiannually on December 31 and June 30.
Jan. 12. Paid Central Credit Union the interest due on the note of July 16 and renewed the loan by issuing a new 180-day, 6% note for $550,000.
May 31. Recorded the year-end adjusting entry for the interest expense on the $40,000,000 bonds and the amortization of the bond premium, using the straight-line method.
Recorded the year-end adjusting entry for the interest expense on the $550,000 note of January 12.
Jun. 30. Recorded the interest payment and the amortization of the premium on the $40,000,000 bonds, using the straight-line method.
Instructions
1. Journalize the transactions.
2. Show the reporting of the liabilities for Trainor Equipment Ltd. on the balance sheet at May 31, 2016, rounding to the nearest whole dollar.