Bull City Industries is considering issuing a $100,000, 7% note to a creditor on account.

Required:

a.

If the note is issued with a 45-day term, journalize the entries to record (refer to the companys Chart of Accounts for exact wording of account titles):

1.	the issuance of the note.
2.	the payment of the note at maturity. Assume a 360-day year.

b.

If the note is issued with a 90-day term, journalize the entries to record (refer to the companys Chart of Accounts for exact wording of account titles):

1.

the issuance of the note.

2.

the payment of the payment of the note at maturity. Assume a 360-day year.

CHART OF ACCOUNTS

Bull City Industries

General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
221	Retirement Savings Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Product Warranty Payable
229	EPA Fines Payable
230	Litigation Claims Payable

EQUITY

310

Common Stock

311

Retained Earnings

312

Dividends

313

Income Summary

a.

If the note is issued with a 45-day term, journalize the entries to record (refer to the companys Chart of Accounts for exact wording of account titles):

1.	the issuance of the note on January 1.
2.	the payment of the note at maturity on February 15. Assume a 360-day year.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Explanation

b.

If the note is issued with a 90-day term, journalize the entries to record (refer to the companys Chart of Accounts for exact wording of account titles):

1.	the issuance of the note on January 1.
2.	the payment of the note at maturity on April 1. Assume a 360-day year.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Salaries Expense
524	Depreciation Expense-Building
525	Delivery Expense
526	Repairs Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Supplies Expense
535	Payroll Tax Expense
536	Vacation Pay Expense
537	Pension Expense
538	Cash Short and Over
539	Product Warranty Expense
540	Damage Awards and Fines
541	Miscellaneous Expense
710	Interest Expense