Part A - Mastery
Q1. Knight Industries produces chairs for sporting facilities. Brand Stadium Corp. purchased $35,000 worth of chairs from Knight on account, but failed to pay within the prescribed period. Brand agreed to refinance with Knight by signing a five-month note, with 9% interest, all payable at the end of the note.
Please record the appropriate journal entry establishing the note on Knight's books.
Accts. Pay, Accts. Rec., Cash, Int. Exp., Int. Pay., Int. Rec., Notes Pay, Notes Rec.
What are the associated accounts and amounts for this transaction?
Q2. McNamee Juices sells projects in the health-food industry. McNamee sold Johnny Mac merchandise for $5,000 on account. Johnny Mac ran into a cash crunch and was able to pay only $1,200 in the prescribed period. Both parties agreed to satisfy the remaining balance with a six-month note, at 13% interest, all payable at the end of the note.
Please record the appropriate journal entry established the note on McNamee's books.
Accts. Pay, Accts. Rec., Cash, Int. Exp., Int. Pay., Int. Rec., Notes Pay, Notes Rec.
What are the associated accounts and amounts for this transaction?
Q3. Grant House Furnishing accepted a ten-month, 8% interest rate, $3,000 note from one of its customers on April 1, 2008.
How much interest will Grant House Furnishings accrue for the month?
Q4. Stronger Satellites accepted a five-month, 7% interest rate, $6,000 note from one of its customer on June 1, 2008. The entire balance is payable at the note's maturity.
Prepare the June 30 adjusting journal entry related to the note.
Accts. Pay, Accts. Rec., Cash, Int. Exp., Int. Pay., Int. Rec., Notes Pay, Notes Rec.
What are the associated accounts and amounts for this transaction?
Q5. OBX Mufflers accepted a five-month, 7.5% interest. $2,400 notes from ABD Motors on June 1, 2008. The entire balance is payable at? Total Payment ___________________
Q6. George Masonry accepted a four-month, 10% interest, $1,800 note from Earth Tones on July 1, 2008. The entire balance is payable at notes maturity. Assume that George Masonry accrues interest on the note monthly. Prepare the October 31st journal entry to record the ultimate payment. (Accounts are pre-set)
Which Accounts and what are the amounts?
Part B - Calculating Ending Inventory
Q1. Hassan Headgear is a baseball cap shop in Santa Cruz, CA, that began business on April 13, 2008. The company had the following inventory purchase records for the month.
|
Date
|
Units Purchased
|
Cost Per Unit
|
Total Cost
|
|
4/15
|
200
|
$5.00
|
$1,000
|
|
4/24
|
500
|
$6.00
|
$3,000
|
|
4/26
|
300
|
$5.50
|
$1,650
|
|
4/29
|
400
|
$5.75
|
$2,300
|
|
TOTAL
|
1400
|
|
$7,950
|
The store sold 850 baseball caps during April 2008. Using the FIFO (First-In, First Out) period method, calculate the store's ending inventory of April.
Q2. Turk's Toys Train began 2008 with 1,200 toy trains, which cost $9 each, in its inventory. During the year, it made the following purchases of inventory.
|
Date
|
Units Purchased
|
Cost Per Unit
|
Total Cost
|
|
3/18
|
500
|
$9.50
|
$4,750
|
|
6/4
|
700
|
$10.00
|
$7,000
|
|
8/28
|
400
|
$10.50
|
$4,200
|
|
11/13
|
900
|
$11.50
|
$10,350
|
|
TOTAL
|
2500
|
|
$26,300
|
The store sold 2,900 toy trains during the year. What was the company's ending inventory under the LIFO) Last-In, First-Out) period inventory costing system?
Part C - Asset Disposals
Q1. Foster Glass Company purchased a fax machine on July 1, 2007 for $1,800. The fax machine had an estimated useful life of three years and a salvage value of $300. Assume Foster uses the straight-line depreciation method.
Foster decided to replace its fax machine with a Bizhub on July 1, 2008, Eagle Outfitters offered to buy the used fax machine from Foster for $1,000 (proceeds received upon purchase)
Record on Foster's book the July 1, 2008 journal entry detailing the sale of the fax machine to Eagle.
(Accts. Rec., Accumulated Dep., Cash, Depreciation Exp., Equipment, Insurance Exp., Interest Exp. , Interest Pay., Loss on Disposal of Fixed Assets, Service Revenue, Supplies, Supplies Exp.)
Q2. Foster Glass Company purchased a fax machine on July 1, 2007 for $1,800. The fax machine had an estimated useful life of three years and a salvage value of $300. Assume Foster uses the double declining balance (DDB) depreciation method.
Foster decided to replace its fax machine with a Bizhub on July 1, 2008, Eagle Outfitters offered to buy the used fax machine from Foster for $1,000 (proceeds received upon purchase)
Record on Foster's book the July 1, 2008 journal entry detailing the sale of the fax machine to Eagle.
(Accts. Rec., Accumulated Dep., Cash, Depreciation Exp., Equipment, Insurance Exp., Interest Exp. , Interest Pay., Loss on Disposal of Fixed Assets, Service Revenue, Supplies, Supplies Exp.)
Part D - Notes Payable
Q1. Vega Cestas, Inc. purchased a basket weaving machine on January 1. The machine cost $10,000 and the seller accepted an eight month note with an annual interest rate of 8% as payment. Interest accrues monthly on the note, but all interest and principal will be paid when the not matures.
Calculate the amount of interest that will accrue each month on the note.
Q2. Gallardo Enterprises operates a chain of restaurants in the Southwest. On December 1, 2008. Gallardo Enterprises purchased a commercial freezer for $16,000. The seller of the freezer accepted a note due in 5 months. The note has an annual interest rate of 9%. Interest is accrued monthly but all interest and principle will be paid when the note is due on May 1, 2009.
Prepare the December 31, 2008 journal entry for Gallardo Enterprises to capture the accrual of interest on the note. (Cash, Equipment, Interest Exp., Interest Pay., Interest Rec., Interest Rev., Notes Rec.)