Answered: (Learning Objective 3: Purchase…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

(Learning Objective 3: Purchase inventory, accrue interest, and pay a short-term
note) On September 1, 2019, The Shoppes at Forest Lake, Inc., purchased inventory costing
$63,000 by signing an 8%, six-month, short-term note payable. The company will pay the entire
note (principal and interest) on the note’s maturity date.
Requirements
1. Journalize the company’s purchase of inventory.
2. Make the adjusting entry for accrual of interest on the note payable on December 31, 2019.
3. At December 31, 2019, what is reported on the balance sheet related to this note payable?
4. Record the payment of the note payable (principal and interest) on its maturity date

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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