1.Recording a Note Payable through Its Time to Maturity (6 points)

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Grabber Inc. is a retailer. Each Christmas season, Grabber builds up its inventory to meet the needs of Christmas shoppers. A large portion of these Christmas sales are on credit. As a result, Grabber often collects cash from the sales several months after Christmas. Assume that on September 1, 2019, Grabber borrowed $4.2 million from Multinational Bank for working capital purposes and signed an interest-bearing note due in six months. The interest rate was 6 percent per annum payable at maturity. The accounting period ends December 31.

1. Record a journal entry to record the note on September 1.

2. Record any adjusting entry required at the end of the annual accounting period.

3. Record the journal entry to record payment of the note and interest on the maturity date, February 28, 2020.

2.Recording Growth in a Savings Account with Equal Periodic Payments (10 points)

On each December 31, you plan to deposit $4,000 in a savings account. The account will earn 9 percent annual interest, which will be added to the fund balance at year-end. The first deposit will be made December 31, 2019 (end of period).

1. Record the required journal entry on December 31, 2019.

2. What will be the balance in the savings account at the end of the 10th year (i.e., after 10 deposits)?

3. What is the interest earned on the 10 deposits?

4. How much interest revenue did the fund earn in 2020? 2021?

3.Computing the Issue Price of a Bond (6 points)

Franklin Corporation issued a $100,000 bond that matures in five years. The bond has a stated interest rate of 5 percent. On January 1, 2020, when the bond was issued, the market rate was 8 percent. The bond pays interest twice per year, on June 30 and December 31.

At what price was the bond issued?

4.Recording Bond Issue and First Interest Payment with Discount (5 points)

On January 1, 2020, Tampa Corporation sold a $950,000, 7 percent bond issue (9 percent market rate). The bonds were dated January 1, 2020, pay interest each December 31, and mature in 10 years.

1. Record the journal entry to record the issuance of the bonds.

2. Record the journal entry to record the interest payment on December 31, 2020. Use straight-line

amortization.

3. Show how the interest expense and the bonds payable should be reported on the December 31, 2020,

annual financial statements.