Question

Acme, Inc. - Normal journal entries for the month of December, 2018: Dec 1 Issued 65,000 shares of common stock for $14 per share. Dec 1 Paid December rent of $7,500. Dec. 1 Issued $200,000 bonds at face with an interest rate of 10% due in 5 years. Dec 3 Purchased $350,000 of inventory terms 1/10, net 30. Dec 5 Sold land at cost for cash, $20,000 Dec 8 Sold equipment with original cost of $60,000 and tumulated depreciation of $35,000 for $18,000 cash. Purchased equipment for $50,000 cash. Dec 10 Sold inventory on account for $340,000 with a cost of $160,000, terms 2/15, net 30. Dec 11 Paid for merchandise inventory that was purchased on December 3rd. Dec 15 Paid utilities, $1,700. Dec 18 Wrote off uncollectible accounts, $18,000. Dec 19 Received payment in full for sale on December 10th. Dec 31 Declared and paid cash dividend of $0.40 per share. Dec 31 Paid wages and salaries of $9,200.

Answer 1

Required journal entries are:

Date	General Journal	Debit	Credit
Dec 1	Cash	910000
	Common stock		910000
	(for common stock issued for cash)
Dec 1	Rent expense	7500
	Cash		7500
	(for December rent paid)
Dec 1	Cash	200000
	Bonds payable		200000
	(for bonds payable issued)
Dec 3	Merchandise inventory	350000
	Cash		350000
	(for merchandise inventory purchased)
Dec 5	Cash	20000
	Land		20000
	(for land sales at cost)
Dec 8	Cash	18000
	Accumulated depreciation	35000
	Loss on sale	7000
	Equipment		60000
	(for equipment sold and loss recognized)
Dec 9	Equipment	50000
	Cash		50000
Dec 10	Accounts receivable	340000
	Cost of goods sold	160000
	Sales revenue		340000
	Merchandise inventory		160000
	(for inventory sold on account)
Dec 11	Accounts payable	350000
	Discount received		3500
	Cash		346500
	(for payment made for purchases and discount availed)
Dec 15	Utilities expense	1700
	Cash		1700
	(for utilities paid)
Dec 18	Allowance for doubtful accounts	18000
	Accounts receivable		18000
	(for accounts receivable written off)
Dec 19	Cash	333200
	Discount	6800
	Accounts receivable		340000
	(for payment received less discount)
Dec 31	Dividend	26000
	Cash		26000
	(for cash dividend paid)
Dec 31	Wages & salaries expenses	9200
	Cash		9200
	(for wages & salaries paid)
Dec 31	Bond interest expense	1666.67
	Interest payable		1666.67
	(for interest of December month accrued on bonds payable)

Calculation of loss on sale on Dec 8:

Loss on sale = Sale price - Net book value

Loss on sale = $18000 - ($60000 - $35000)

Loss on sale = $18000 - $25000 = $7000

Calculation of discount received on Dec 11:

Since the payment was made on Dec 11 i.e. within 10 days of purchasing date of Dec 3, so there will a discount of 1%.

Discount amount = $350000 * 1% = $3500

Calculation of discount allowed on Dec 19:

Since the payment was made on Dec 19 i.e. within 15 days of purchasing date of Dec 10, so there will a discount of 2%.

Discount amount = $340000 * 2% = $6800

Calculation of bond interest on Dec 31:

Interest for 1 month (i.e. December) = $200000 * 10% * 1 / 12 = $1666.67