Accounting Chap 10 - Sheet1
Accounting Chap 10 - Sheet1
Accounting Chap 10 - Sheet1
CHAPTER 10 EXERCISES
Ex 1: E10-1
GENERAL JOURNAL
June 1, 2017 Cash $15,000
Notes Payable 15,000
(Issuance of 8%, 7- month note to Gem State Bank)
June 30, 2017 Interest Expense (15,000 x 8% : 12) 100 Interest Payable
Interest Payable 100 Dec 31 Adj. 700
(Accrue interest for 1 month on Gem State Bank note) Dec 31 Bal. 700
Jan 1, 2018 Notes Payable 15,000
Interest Payable (15,000 x 8% x 7/12) 700
Cash 15,700
(Payment of interest-bearing note)
Ex 2: E10-3
GENERAL JOURNAL
June 1 Cash $60,000
Notes Payable 60,000
(Issuance of 8%, 6- month note to Acme Bank)
June 30 Interest Expense (60,000 x 8% : 12) 400 Interest Expense
Interest Payable 400 Dec 1 Adj. 2,400
(Accrue interest for 1 month on Acme Bank note) Dec 1 Bal. 2,400
Dec 1 Notes Payable 60,000
Interest Payable (60,000 x 8% x 6/12) 2,400
Cash 62,400
(Payment of interest-bearing note)
Ex 3: P10-2A
a) b)
GENERAL JOURNAL Notes Payable
Sep 1 Inventory $12,000 Dec 1 12,000 Sep 1 12,000
Notes Payable 12,000 Oct 1 16,500
(Issuance of 6%, 3- month note to Pippen) Nov 1 26,000
Sep 30 Interest Expense (12,000 x 6% x 1/12) 60 Dec 31 Bal. 42,500
Interest Payable 60
(Accrue interest for 1st month on Pippen note) Interest Expense
Oct 1 Equipment 16,500 Nov 30 Adj. 180
Notes Payable 16,500 Dec 31 Adj. 330
(Issuance of 8%, 4- month note to Prime Bank) Dec 31 Adj. 260
Oct 31 Interest Expense (12,000 x 6% x 1/12) 60 Dec 31 Bal. 770
Interest Payable 60
(Accrue interest for 2nd month on Pippen note) Interest Payable
Oct 31 Interest Expense (16,500 x 8% : 12) 110 Dec 1 Adj. 180 Nov 30 Adj. 180
Interest Payable 110 Dec 31 Adj. 330
(Accrue interest for 1st month to Prime Bank note) Dec 31 Adj. 260
Nov 1 Equipment 34,000 Dec 31 Bal. 590
Cash 8,000
Notes Payable (6%, 12- month Vehicle note) 26,000
(Purchase of vehicle) c) EHLER CORPORATION
Nov 30 Interest Expense (12,000 x 6% x 1/12) 60 BALANCE SHEET (partial)
Interest Payable 60 December 31, 2017
(Accrue interest for 3rd month on Pippen note) Notes Payable 42,500
Nov 30 Interest Expense (16,500 x 8% x 1/12) 110 Interest Payable 590
Interest Payable 110
(Accrue interest for 2nd month to Prime Bank note) d) Interest Expense incurred during 2017 is $770
Nov 30 Interest Expense (26,000 x 6% : 12) 130
Interest Payable 130
(Accrue interest for 1 month on Vehicle note)
Dec 1 Notes Payable 12,000
Interest Payable 180
Cash 12,180
(Payment of interest-bearing Pippen note)
Dec 31 Interest Expense (16,500 x 8% x 1/12) 110
Interest Payable 110
(Accrue interest for 3rd month to Prime Bank note)
Dec 31 Interest Expense (26,000 x 6% x 1/12) 130
Interest Payable 130
(Accrue interest for 2nd month Vehicle note)
Ex 4: P10-3A
GENERAL JOURNAL
January 1 Interest Payable $40,000
Cash 40,000
(Payment of bond interest)
January 1 Bonds Payable 200,000
Loss on Bond Redemption 6,000
Cash (200,000 x 103%) 206,000
(Redemption of $200,000 bonds at 103)
December 31 Interest Expense (500,000-200,000) x 8% 24,000
Interest Payable 24,000
(Accrue 1- year interest from Jan 1 on remaining bonds)
Ex 5: P10-4A
Ex 6: P10-5A
a) GENERAL JOURNAL b)
Jan 1, 2017 Cash $6,000,000 Cash from selling bonds = 6,000,000 x 98% = 5,880,000
Bonds Payable 6,000,000 Unamortized Bond Discount = 6,000,000 - 5,880,000 = 120,000
(Issuance of 7%, 15- year bonds) Bond Discount Amortization = 120,000 : 15 = 8,000
b) Dec 31, 2017 Interest Expense 428,000 Remaining Discount on Bonds Payable = 120,000 - 8,000 = 112,000
Discount on Bonds Payable 8,000
Interest Payable (6,000,000 x 7%) 420,000 MALCOLM COMPANY
(Amortization of bond discount after 1 year) BALANCE SHEET (Long- term Liabilities)
c) Jan 1, 2019 Bonds Payable 6,000,000 December 31, 2017
Loss on Bond Redemption 224,000 Bonds Payable 6,000,000
Cash (6,000,000 x 102%) 6,120,000 Less: Discount on bonds payable 112,000
Discount on Bonds Payable (6,000,000 - 5,896,000) 104,000 Total long- term liabilities 5,888,000
(Redemption of bonds at 102)