Question

The following are selected 2020 transactions of Crane Corporation. Sept. 1 Purchased inventory from Encino Company on account for $37,600. Crane records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $37,600, 12-month, 8% note to Encino in payment of account. Oct. 1 Borrowed $37,600 from the Shore Bank by signing a 12-month, zero-interest-bearing $41,680 note.

Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.) Prepare adjusting entries at December 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,125.) Compute the total net liability to be reported on the December 31 balance sheet for: (1) The interest-bearing note $enter a dollar amount (2) The zero-interest-bearing note $enter a dollar amount

Answer 1

Answer: credit $37,600 $ 37600 Date particulars Debit la) Sep purchases 1 Ale dr $37,600 To Accounts payable Being Record Inventory purchase) Joct 1 Accounts payable Ale dr|$37,600 c To Noty payable (Being to record Essuance of Note taxable accounts payable) Joctil Cash 1 Alc dr $37,600 Discount on noty payable Ale dr $4,080 - To Noty payable (Being to recosd the amount borrowed from bank se essuing note) $41,680 (6) Dec 31 Interest expense Alc dr 1752 (37600X8%X3112) - To Interest payable 1$ 752 Being to record Interest expense) Dec31) Interest expense 1 Ale ar $1020 (1080x3/12) To Discount on Mong payable $ 1020 C) the total Met liability to be reported on the Dee 31 Balance sheet: - (1) the interest bearing neote nota a note payable $37,600 Interest payable $752 $ 38,352 12) Zero Interest bearing Note Note payable $41,680 Less: Discount $3060 (4080-1020) $38.620