Question
Notes Payable and Interest On July 1, 2016, Kamer's Trinkets borrowed $30,000 from the bank. Kamer signed a ten-month, 8% promissory note for the entire
Notes Payable and Interest
On July 1, 2016, Kamer's Trinkets borrowed $30,000 from the bank. Kamer signed a ten-month, 8% promissory note for the entire amount. Kamer's uses a calendar year-end.
Required:
1.Prepare the journal entry on July 1 to record the issuance of the promissory note. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | |||||||||||
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| Stockholders | Net | |||||
| Date | Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
| 2016 |
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| July 1 |
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2. Prepare any adjusting entries needed at year-end. Use months in calculation. Do not round intermediate calculations. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
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| Balance Sheet |
| Income Statement | |||||||||||
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| Stockholders | Net | |||||
| Date | Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
| 2016 |
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| Dec. 31 |
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3. Prepare the journal entry on May 1 to record the payment of principal and interest. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
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| Balance Sheet |
| Income Statement | |||||||||||
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| Stockholders | Net | |||||
| Date | Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
| 2017 |
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| May 1 |
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_________________________________________________________________________________________________________________________________
Warranties
Polar Company manufactures and sells Ice Machines. Polar provides all customers with a two-year warranty guaranteeing to repair, free of charge, any defects reported during this time period. During the year, it sold 100,000 Ice Machines for $280 each. Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Polar expects to incur expenditures of $17 to repair each Ice Machine. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. Polar incurred $115,000 in actual expenditures during the year.
Required:
Prepare all journal entries necessary to record the events related to the warranty transactions during the year.
During the year, it sold 100,000 Ice Machines for $280 each.
How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Polar expects to incur expenditures of $17 to repair each Ice Machine. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Polar incurred $115,000 in actual expenditures during the year. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Determine the adjusted ending balance in the Estimated Liability for Warranties account.
$
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Auditing Today
Authors: Emile Woolf
3rd Edition
013052168X, 9780130521682
