(Accounts and Notes Payable) The following are selected 2004 transactions of Sean Astin Corporation. Sept. 1 Purchased...

Question:

(Accounts and Notes Payable) The following are selected 2004 transactions of Sean Astin Corporation.

Sept. 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system.

Oct. 1 Issued a $50,000, 12-month, 12% note to Encino in payment of account.

Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, noninterest-bearing $56,000 note.

Instructions

(a) Prepare journal entries for the selected transactions above.

(b) Prepare adjusting entries at December 31.

(c) Compute the total net liability to be reported on the December 31 balance sheet for:

(1) the interest-bearing note.

(2) the non-interest-bearing note.

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