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The CFO has asked you to investigate Woodlawns loan accounts in the August 31, 2011 unadjusted trial balance and make any adjustments you feel are
The CFO has asked you to investigate Woodlawns loan accounts in the August 31, 2011 unadjusted trial balance and make any adjustments you feel are necessary.
You have gathered the following information concerning Woodlawns loans:
- Woodlawns inventory and accounts receivable are pledged as security for the demand bank loan.
- The term bank loan is with the MacLachlan Bank. This is a four-year lean for $100,000 taken out on August 31, 2008. The loan is secured by a chattel mortgage on the companys furniture, fixtures and equipment. The loan has an interest rate of 8%. Interest is payable annually on the anniversary date of the loan.
- The mortgage loan was taken out on March 31, 2011 when the property was purchased. The original amount of the lean was $170,000. The interest rate on the loan is 4.19% semi-annual not in advance (this is equivalent to a monthly interest rate of .35%). Blended monthly payments (portion is interest and portion is principal) of $1044 are due at the end of each month beginning April 30, 2011. The balance of the mortgage comes due on March 31, 2016. The loan is secured by a mortgage on the property acquired
Required
Prepare a report for the CFO. Your report should include the following:
- The journal entries you made to correct theses accounts or a statement that you believe no adjustment is necessary.
- Detailed calculations and explanations for the amounts in your journal entries or a detailed explanation of why no adjustment is necessary.
- The financial statement captions and related amounts that will appear on the balance sheet of Woodlawn for loans at August 31, 2011.
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