Intermediate Accounting I Chapter 2

On November 1, 2016, the company borrowed $250,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2017.

Interest expense 5,000 Interest payable 5,000 Interest expense = $250,000 × 12% × 2/12 = $5,000

3. Purchased inventory on account at a cost of $134,000. The company uses the perpetual inventory system.

Inventory 134,000 d Accounts payable 134,000 c

7. Paid $114,000 on account for the merchandise purchased in 3.

Accounts payable 114,000 d Cash 114,000 c

4. Credit sales for the month totaled $190,000. The cost of the goods sold was $114,000.

Accounts receivable 190,000 d Sales revenue 190,000 c Cost of goods sold 114,000 d Inventory 114,000 c

Credit sales for the month totaled $270,000. The cost of the goods sold was $162,000

Assets $108,000 Retained Earning $108,000

Collected $121,500 from customers on account

Assets $121500 Assets ($121500)

Purchased inventory on account at a cost of $182,000. The company uses the perpetual inventory system.

Assets $182,000 Liability $182,000

Issued 60,000 shares of common stock in exchange for $600,000 in cash.

Assets $600,000 PIC $600,000

Purchased equipment at a cost of $100,000. $25,000 cash was paid and a note payable was signed for the balance owed.

Assets $75000 Liability $75000

Paid $162,000 on account for the merchandise purchased in 3.

Assets ($162,000) Liability ($162,000)

Recorded depreciation expense of $2,500 for the month on the equipment.

Assets ($2500) Retained Earnings ($2500)

Paid $8,000 in rent on the warehouse building for the month of March.

Assets ($8000) Retained Earning ($8000)

Paid $8,050 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.

Assets ($8050) Assets $8050

1. Issued 44,000 shares of common stock in exchange for $440,000 in cash.

Cash 440,000 d Common stock 440,000 c

8. Collected $85,500 from customers on account.

Cash 85,500 d Accounts receivable 85,500 c

On December 1, 2016, the company received $4,500 in cash from another company that is renting office space in Falwell's building. The payment, representing rent for December and January, was credited to deferred rent revenue.

Deferred rent revenue 2,250 Rent revenue 2,250 Rent revenue = 1/2 × $4,500 = $2,250

9. Recorded depreciation expense of $1,700 for the month on the equipment.

Depreciation expense 1,700 d Accumulated depreciation 1,700 c

Depreciation on equipment totaled $13,500 for the year.

Depreciation expense 13,500 Accumulated depreciation 13,500

2. Purchased equipment at a cost of $68,000. $17,000 cash was paid and a note payable was signed for the balance owed.

Equipment 68,000 d Cash 17,000 c Note payable 51,000 c

A three-year fire insurance policy was purchased on July 1, 2016, for $14,040. The company debited insurance expense for the entire amount.

Prepaid insurance 11,700 Insurance expense 11,700 Prepaid insurance = $14,040 × 30/36 = $11,70

6. Paid $6,850 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.

Prepaid insurance 6,850 d Cash 6,850 c

5. Paid $6,000 in rent on the warehouse building for the month of March.

Rent expense 6,000 d Cash 6,000 c

Employee salaries of $19,500 for the month of December will be paid in early January 2017.

Salaries expense 19,500 Salaries payable 19,500