During the fiscal year ended December 31, Swanson Corporationengaged in the following transactions involving notes payable: Aug.6 Borrowed $12,000 from Maple Grove Bank, signing a 45-day, 12percent note payable. Sept. 16 Purchased office equipment fromSeawald Equipment. The invoice amount was $18,000, and Seawaldagreed to accept, as full payment, a 10 percent, three-month notefor the invoice amount. Sept. 20 Paid Maple Grove Bank the noteplus accrued interest. Nov. 1 Borrowed $250,000 from Mike Swanson,a major corporate stockholder. The corporation issued Swanson a$250,000, 15 percent, 90-day note payable. Dec. 1 Purchasedmerchandise inventory in the amount of $5,000 from GathmanCorporation. Gathman accepted a 90-day, 14 percent note as fullsettlement of the purchase. Swanson Corporation used a perpetualinventory system. Dec. 16 The $18,000 note payable to SeawaldEquipment matured today. Swanson paid the accrued amount on thisnote and issues a new 30-day, 16 percent note payable in the amountof $18,000 to replace the note that matured. Prepare the adjustingentry needed at Dec. 31, prior to closing the accounts. Use oneentry for all three notes (round to the nearest dollar)
During the fiscal year ended December 31, Swanson Corporationengaged in the following transactions involving notes payable: Aug.6 Borrowed $12,000 from Maple Grove Bank, signing a 45-day, 12percent note payable. Sept. 16 Purchased office equipment fromSeawald Equipment. The invoice amount was $18,000, and Seawaldagreed to accept, as full payment, a 10 percent, three-month notefor the invoice amount. Sept. 20 Paid Maple Grove Bank the noteplus accrued interest. Nov. 1 Borrowed $250,000 from Mike Swanson,a major corporate stockholder. The corporation issued Swanson a$250,000, 15 percent, 90-day note payable. Dec. 1 Purchasedmerchandise inventory in the amount of $5,000 from GathmanCorporation. Gathman accepted a 90-day, 14 percent note as fullsettlement of the purchase. Swanson Corporation used a perpetualinventory system. Dec. 16 The $18,000 note payable to SeawaldEquipment matured today. Swanson paid the accrued amount on thisnote and issues a new 30-day, 16 percent note payable in the amountof $18,000 to replace the note that matured. Prepare the adjustingentry needed at Dec. 31, prior to closing the accounts. Use oneentry for all three notes (round to the nearest dollar)
Related questions
Exercise 4-1
During 2011 and 2012, Data Resources, Inc. engaged in financial transactions that involved short-term liabilities.
1. Using the financial transaction information provided below, determine the following.
a. All three note maturity dates.
b. The interest due on all three notes on the dates they mature, assuming a 360-day year.
c. The interest expense for the 2011 year-end adjusting entry.
d. For distinguished performance, determine the interest expense for 2012.
Note: The company uses a perpetual inventory system.
2011
| Mar 19 | Purchased $41,250 worth of merchandise from Chipcom, on credit. Terms: 1/10, n/30. | |
| April 29 | Replaced the Mar 19 account payable to Chipcom with a 120-day, $35,000 note at 7% annual interest, plus a cash payment of $6,250. | |
| Jun 16 | Borrowed $55,000 cash from Sunnyvale Bank. Signed a 90-day, 8% interest-bearing note, with a $55,000 face value. | |
| ? | Paid Chipcom the amount due on the note on the date of maturity. | |
| ? | Paid Sunnyvale Bank the amount due on the note on the date of maturity. | |
| Oct 30 | Borrowed $18,000 cash from UCB Bank. Signed a 90-day, 7% interest-bearing note, with a $18,000 face value. | |
| Dec 31 | Recorded an accrued interest adjustment on the UCB Bank note. | |
2012
| ? | Paid UCB Bank the amount due on the note on the date of maturity. |
Liability Transactions
The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year:
| Feb. 15. | Purchased merchandise on account from Hood Co., $144,000, terms n/30. |
| Mar. 17. | Issued a 60-day, 7% note for $144,000 to Hood Co., on account. |
| May 16. | Paid Hood Co. the amount owed on the note of March 17. |
| June 15. | Borrowed $157,200 from Acme Bank, issuing a 60-day, 8% note. |
| July 21. | Purchased tools by issuing a $81,000, 90-day note to Columbia Supply Co., which discounted the note at the rate of 8%. |
| Aug. 14. | Paid Acme Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $157,200. (Journalize both the debit and credit to the notes payable account.) |
| Oct. 13. | Paid Acme Bank the amount due on the note of August 14. |
| Oct. 19. | Paid Columbia Supply Co. the amount due on the note of July 21. |
| Dec. 1. | Purchased office equipment from Mountain Equipment Co. for $144,000, paying $24,000 and issuing a series of ten 6% notes for $12,000 each, coming due at 30-day intervals. |
| Dec. 12. | Settled a product liability lawsuit with a customer for $80,000, payable in January. Emerald Bay accrued the loss in a litigation claims payable account. |
| Dec. 31. | Paid the amount due Mountain Equipment Co. on the first note in the series issued on December 1. |
Required:
1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $18,300; (b) interest on the nine remaining notes owed to Mountain Equipment Co.
