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LO 3
(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
3. At December 31, 2019, what is reported on the
4. Record the payment of the note payable (principal and interest) on its maturity date.
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Chapter 8 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Financial Accounting
- Learning Objective 6: Apply GAAP for notes receivable) Markley Foodscompleted the following selected transactions.2018Oct 31 Sold goods to Basic Foods, receiving a $30,000, three-month, 5.25% note. (Youdo not need to make the cost of goods sold journal entry for this transaction.)Dec 31 Made an adjusting entry to accrue interest on the Basic Foods note.2019Jan 31 Collected the Basic Foods note.Nov 11 Loaned $15,800 cash to Straord Shops, receiving a 90-day, 10.0% note.Dec 31 Accrued the interest on the Straord Shops note.Requirements1. Record the transactions in Markley Foods’ journal. Assume that no sales returns areexpected. Round all amounts to the nearest dollar. Explanations are not required.2. Show what Markley Foods will report on its comparative classified balance sheet atDecember 31, 2019, and December 31, 2018, for Notes Receivable and Interest Receivable.arrow_forward(Learning Objective 3: Record note payable transactions) Dean Sales Companycompleted the following note payable transactions:2018Jul Purchased delivery truck costing $58,000 by issuing aone-year, 4% note payable.Dec 31 Accrued interest on the note payable.2019Jul 1 Paid the note payable at maturity.1Requirements1. How much interest expense must be accrued at December 31, 2018? (Round your answerto the nearest whole dollar.)2. Determine the amount of Dean Sales’ final payment on July 1, 2019.3. How much interest expense will Dean Sales report for 2018 and for 2019? (If needed,round your answer to the nearest whole dollar.)arrow_forward(Learning Objective 3: Account for a short-term note payable) Quimby Sports Authority purchased inventory costing $30,000 by signing a 6% short-term, one-year note payable. Thepurchase occurred on July 31, 2018. Quimby pays annual interest each year on July 31. Journalizethe company’s (a) purchase of inventory; (b) accrual of interest expense on April 30, 2019, which isthe company’s fiscal year-end; and (c) payment of the note plus interest on July 31, 2019. (Roundyour answers to the nearest whole number.) (d) Show what the company would report for liabilitieson its balance sheet at April 30, 2019, and on its income statement for the year ended on that datearrow_forward
- Learning Objective 6: Apply GAAP for notes receivable) Garrett Meals completedthe following selected transactions:2018Oct 31 Sold goods to Rose Foods, receiving a $32,000, three-month 5.5% note. (You dodo not need to make the cost of goods sold journal entry for this transaction.)Dec 31 Made an adjusting entry to accrue interest on the Rose Foods note.2017Jan 31 Collected the Rose Foods note.Nov 11 Loaned $15,800 to Franklin Shops, receiving a 90-day, 9.75% note.Dec 31 Accrued the interest on the Franklin Shops note.Requirements1. Record the transactions in Garrett Meals’ journal. Assume that no sales returns areexpected. Round all amounts to the nearest dollar. Explanations are not required.2. Show what Garrett Meals will report on its comparative classified balance sheet atDecember 31, 2019, and December 31, 2018, for Notes Receivable and Interest Receivablearrow_forward(Learning Objective 5: Apply GAAP to uncollectible receivables) At December 31,2018, before any year-end adjustments, the Accounts Receivable balance of HamptonCompany, Inc., is $330,000. The Allowance for Uncollectible Accounts has a $15,400 creditbalance. Hampton prepares the following aging schedule for Accounts Receivable:Age of AccountsTotal Balance 1–30 Days 31–60 Days 61–90 Days Over 90 Days$330,000 $100,000 $70,000 $30,000Estimated uncollectible 0.6% 3.0% 5.0%$130,00040.0%Requirements1. Based on the aging of Accounts Receivable, is the unadjusted balance of the allowanceaccount adequate? Too high? Too low?2. Make the entry required by the aging schedule. Prepare a T-account for the allowance.3. Show how Hampton will report Accounts Receivable on its December 31 balance sheet.arrow_forwardvsuit? year-end. 3. Journalize the company's payment of the note plus interest on December 31, 2018. S11-5 Determining current portion of long-term note payable Learning Objective 1 On January 1, Irving Company purchased equipment of $280,000 with a long-term note payable. The debt is payable in annual installments of $56,000 due on December 31 of each year. At the date of purchase, how will Irving Company report the note payable? o the Learning Obiective 2. C11arrow_forward
- (Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables, collections,and uncollectibles using the percent-of-sales method; account for notes receivable) LincolnDelivery Corporation is an overnight shipper. Since it sells on credit, the company cannotexpect to collect 100% of its accounts receivable. At December 31, 2018, and 2019,respectively, Lincoln reported the following on its balance sheet (in millions of dollars):December 31,2019 2018Accounts receivable.................................................. $4,300 $3,900Less: Allowance for uncollectible accounts...............Accounts receivable, net........................................... $4,110 $3,690(190) (210)During the year ended December 31, 2019, Lincoln earned service revenue and collected cashfrom customers. Assume uncollectible-account expense for the year was 3% of service revenueon account and that Lincoln wrote off uncollectible receivables and made other adjustmentsas necessary (see below). At year-end,…arrow_forward(Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables,collections, and uncollectibles using the percent-of-sales method; account for notesreceivable) Hopewell Shipping Corporation is an overnight shipper. Since it sells on credit, thecompany cannot expect to collect 100% of its accounts receivable. At October 31, 2018, and2019, respectively, Hopewell reported the following on its balance sheet (in millions of dollars):October 31,2019 2018Accounts receivable.................................................. $4,200 $4,000Less: Allowance for uncollectible accounts...............Accounts receivable, net........................................... $4,030 $3,840(170) (160)During the year ended October 31, 2019, Hopewell earned service revenue and collected cashfrom customers. Assume uncollectible-account expense for the year was 5% of service revenueon account and Hopewell wrote off uncollectible receivables and made other adjustments as necessary (see below). At year-end,…arrow_forward(Learning Objective 5: Apply GAAP for uncollectible receivables) AtDecember 31, 2018, Concord Travel Agency has an Accounts Receivable balance of $87,000.Allowance for Uncollectible Accounts has a credit balance of $880 before the year-end adjustment. Service revenue (all on account) for 2018 was $800,000. Concord estimates that itsuncollectible-account expense for the year is 3% of service revenue. Make the year-end entryto record uncollectible-account expense. Show how Accounts Receivable and Allowance forUncollectible Accounts are reported on the balance sheet at December 31, 2018arrow_forward
- (Learning Objective 5: Evaluate collectibility using the allowance for uncollectibleaccounts) During its first year of operations, Spring Garden, Inc., had sales of $439,000, all onaccount. Industry experience suggests that Spring Garden’s uncollectibles will amount to 4% ofcredit sales. At December 31, 2018, accounts receivable total $59,000. The company uses theallowance method to account for uncollectibles.1. Make Spring Garden’s journal entry for uncollectible-account expense using thepercent-of-sales method.2. Show how Spring Garden should report accounts receivable on its balance sheet atDecember 31, 2018.arrow_forward(Learning Objectives 1, 2: Apply GAAP for proper revenue recognition; accountfor sales allowances) Niagara Jewelry sells to retailers who then resell the products. Niagaradoes not offer sales discounts for early payment; it asks that customers pay in full within15 days or at the point of sale with a credit card. The company had the following selectedtransactions during July:July 2 Sold $150,000 of merchandise to Lakeside Jewels on account.Sold $12,000 of merchandise to Superior Crystals, which paid by credit card. Thecredit card company charges Niagara a fee of 2% on credit card sales.July 17Shining Stones noticed that some of the merchandise received was damaged, so itreturned $17,000 worth of merchandise to Niagara.July 30July 3July 16July 19Shining Stones paid the balance of what it owed for the purchase on July 17.Lakeside Jewels paid the balance of what it owed for the purchase on July 2.Sold $185,000 of merchandise to Shining Stones on account.Requirements1. Journalize Niagara’s…arrow_forward(Learning Objective 6: Account for notes receivable)1. Compute the amount of interest during 2018, 2019, and 2020 for the following notereceivable: On May 31, 2018, Wyoming State Bank loaned $240,000 to Lindsey Weston ona two-year, 8% note.2. Which party has a/ana. note receivable?b. note payable?c. interest revenue?d. interest expense?3. How much in total would Wyoming State Bank collect if Lindsey Weston paid off the noteearly on November 30, 2018?arrow_forward
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