Chapter 11 Problem Set B Problem 11-4 On March 1, 2020, Twin Cities Steak House purchased restaurant supplies in the amount of $2,500 from Heart of Illinois Restaurant Supply Corp. on account. In mid-March, the governor of Illinois ordered bars and restaurants closed due to COVID-19. Twin Cities Steak House knew that they wouldn't be able to pay the amount due on 3/31, so they spoke to Restaurant Supply, who accepted a 3-month note payable for $2,500 at an interest rate of 6%. Prepare the following entries 1. March 1, 2020 purchase of supplies on account 2. March 31, 2020 conversion of accounts payable into a note payable 3. July 1, 2020 repayment of note Problem 11-5 Jen Company borrowed $200,000 with a 15-month note payable to First City Bank on August 1, 2020. The interest rate on the note is 7%. The interest and principal are due Nov 1, 2021. Prepare the 3 journal entries 1. Borrowing on August 1, 2020 2. Adjusting entry on December 31, 2020 3. Repayment on November 1, 2021. Problem 11-6 a. Alternative Treatments of Contingent Liabilities: Record with a journal entry, will be reported on financial statements b. Disclose in a footnote to the financial statements Do nothing C. TREATMENT 2. EVENT 1. A suit brought by a local civic organization against ABC Corporation for hiring out-of-town workers has only a remote probability of prevailing. A liability for warranty work to be performed as the result of a just-announced recall is probable, but no reasonable estimate can be made 3. A liability for warranty work that will be performed as a result of a recent recall has been estimated at $100,000. 4. A wrongful death suit has been filed and has only a reasonable possibility of prevailing. Chapter 11 Problem Set B Problem 11-4 On March 1, 2020, Twin Cities Steak House purchased restaurant supplies in the amount of $2,500 from Heart of Illinois Restaurant Supply Corp. on account. In mid-March, the governor of Illinois ordered bars and restaurants closed due to COVID-19. Twin Cities Steak House knew that they wouldn't be able to pay the amount due on 3/31, so they spoke to Restaurant Supply, who accepted a 3-month note payable for $2,500 at an interest rate of 6%. Prepare the following entries 1. March 1, 2020 purchase of supplies on account 2. March 31, 2020 conversion of accounts payable into a note payable 3. July 1, 2020 repayment of note Problem 11-5 Jen Company borrowed $200,000 with a 15-month note payable to First City Bank on August 1, 2020. The interest rate on the note is 7%. The interest and principal are due Nov 1, 2021. Prepare the 3 journal entries 1. Borrowing on August 1, 2020 2. Adjusting entry on December 31, 2020 3. Repayment on November 1, 2021. Problem 11-6 a. Alternative Treatments of Contingent Liabilities: Record with a journal entry, will be reported on financial statements b. Disclose in a footnote to the financial statements Do nothing C. TREATMENT 2. EVENT 1. A suit brought by a local civic organization against ABC Corporation for hiring out-of-town workers has only a remote probability of prevailing. A liability for warranty work to be performed as the result of a just-announced recall is probable, but no reasonable estimate can be made 3. A liability for warranty work that will be performed as a result of a recent recall has been estimated at $100,000. 4. A wrongful death suit has been filed and has only a reasonable possibility of prevailing
