CHAPTER 10 FINANCIAL ACCOUNTING

Brief Exercise 10-3

Bluestem Supply does not does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $11,445. All sales are subject to a 5% sales tax.

Compute sales taxes payable.

Sales tax payable $

Make the entry to record sales taxes payable and sales. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
Mar. 16

 

 

 

 

 

 

 

Brief Exercise 10-8

Saddle Inc. issues $313,000, 10-year, 8% bonds at 96. Prepare the journal entry to record the sale of these bonds on March 1, 2014.
(Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

 

Brief Exercise 10-10

Rooney Corporation issued 3,920 9%, 6-year, $1,000 bonds dated January 1, 2014, at face value. Interest is paid each January 1.

(a) Prepare the journal entry to record the sale of these bonds on January 1, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(b) Prepare the adjusting journal entry on December 31, 2014, to record interest expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(c) Prepare the journal entry on January 1, 2015, to record interest paid. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Brief Exercise 10-12

Presented here are long-term liability items for Evenson Inc. at December 31, 2014.

Bonds payable (due 2018) $778,300
Notes payable (due 2016) 76,540
Discount on bonds payable 24,700

Prepare the long-term liabilities section of the balance sheet for Evenson Inc.

 

Brief Exercise 10-14

Suppose the 2014 adidas financial statements contain the following selected data (in millions).

Current assets $4,557 Interest expense $170
Total assets 8,345 Income taxes 102
Current liabilities 3,011 Net income 254
Total liabilities 4,434
Cash 762

Compute the following values.

(a) Working capital $
(b) Current ratio (Round to 2 decimal places, e.g. 6.25:1.) :1
(c) Debt to assets ratio (Round to 0 decimal places, e.g. 62%.) %
(d) Times interest earned (Round to 2 decimal places, e.g. 6.25.)  times

Exercise 10-1 (Part Level Submission)

Jenny Kanne and Cindy Travis borrowed $57,900 on a 7-month, 4% note from Golden State Bank to open their business, KT’s Coffee House. The money was borrowed on June 1, 2014, and the note matures January 1, 2015.
Prepare the entry to record the receipt of the funds from the loan.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Prepare the entry to accrue the interest on June 30.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Assuming adjusting entries are made at the end of each month, determine the balance in the interest payable account at December 31, 2014.
Prepare the entry required on January 1, 2015, when the loan is paid back. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 10-3 (Part Level Submission)

On June 1, Fancher Company Ltd. borrows $112,500 from First Bank on a 6-month, $112,500, 8% note. The note matures on December 1.
Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30.
(Credit account titles are automatically indented when amount is entered. Do not indnt manually.)
What was the total financing cost (interest expense)?

Exercise 10-4 (Part Level Submission)

In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales.

1. Furcal Company enters sales and sales taxes separately on its cash register. On April 10, the register totals are sales $28,000 and sales taxes $1,400.
2. Crystal Company does not segregate sales and sales taxes. Its register total for April 15 is $19,620, which includes a 9% sales tax.
Prepare the entries to record the sales transactions and related taxes for Furcal Company.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the entries to record the sales transactions and related taxes for Crystal Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 10-6 (Part Level Submission)

Season tickets for the Wildcats are priced at $340 and include 17 home games. An equal amount of revenue is recognized after each game is played. When the season began, the amount credited to Unearned Ticket Revenue was $1,768,000. By the end of October, $1,144,000 of the Unearned Ticket Revenue had been recognized as revenue.
How many season tickets did the Wildcats sell?
How many home games had the Wildcats played by the end of October?
Prepare the entry to recognize the revenue after the first home game had been played. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Problem 10-2A (Part Level Submission)

Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to notes payable.

Sept. 1 Issued a $13,200 note to Lippert to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1. (Ermlar uses a perpetual inventory system.)
Sept.30 Recorded accrued interest for the Lippert note.
Oct. 1 Issued a $19,200, 10%, 4-month note to Shanee Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Oct. 31 Recorded accrued interest for the Lippert note and the Shanee Bank note.
Nov. 1 Issued a $25,200 note and paid $7,600 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.
Nov. 30 Recorded accrued interest for the Lippert note, the Shanee Bank note, and the vehicle note.
Dec. 1 Paid principal and interest on the Lippert note.
Dec. 31 Recorded accrued interest for the Shanee Bank note and the vehicle note.

Prepare journal entries for the transactions noted above.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Show the balance sheet presentation of notes payable and interest payable at December 31.

How much interest expense relating to notes payable did Ermlar incur during the year?

Do It! Review 10-1

You and several classmates are studying for the next accounting examination. They ask you to answer the following questions: (Round answers to 0 decimal places, e.g. $62,482.)

1. If cash is borrowed on a $69,400, 10-month, 10% note on August 1, how much interest expense would be incurred by December 31?
2. The cash register total including sales taxes is $42,210, and the sales tax rate is 5%. What is the sales taxes payable?
3. If $42,210 is collected in advance on November 1 for 8-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31?

 

 

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