Journal Entry

Chapter 10 Homework Student Templates – 7th Edition M 10 – 1 A local theater company sells 1,500 season ticket packages at a price of $250 per package. The first show in the 10-show season starts this week. Required: Show the accounting equation effects and prepare the journal entries related to (a) the sale of the season tickets before the first show(b) the revenue from fulfilling the performance obligation by putting on the first show. Assets Cash + 375,000 (a) (b) Liabilities Stockholders’ Equity Deferred Revenue + 375,000 Deferred Revenue – 37,500 Service Revenue (+R) +37,500 (a) Journal Entry to record the sale of the season tickets before the first show: Cash (1,500 x $250) 375,000 Deferred Revenue 375,000 (b) Journal Entry to record revenue from fulfilling the first show: M 10 – 2 Grandpa Clocks, Inc. (GCI), is a retailer of wall, mantle, and grandfather clocks. Assume GCI sells a grandfather clock for $10,000 cash plus 4 percent sales tax. The clock had originally cost GCI $6,000. Required: Show the accounting equation effects & prepare the journal entries related to this transaction. Assume GCI uses a perpetual inventory system. Assets Cash + 10,400 Inventories – 6,000 Liabilities Sales Tax Payable + 400 Stockholders’ Equity Sales Revenue (+R) +10,000 CGS (+E) – 6,000 Cash Sales Tax Payable Sales Revenue Cost of Goods Sold 6,000 Inventories 6,000 Chapter 10 Homework – ACCT 220 7th Edition 1 M 10 – 3 Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $50,000 but that employee income taxes totaling $7,000 and FICA taxes totaling $2,625 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. Required: What was the amount of net pay? Assuming Lightning Electronics also must pay $250 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs? Net Pay $40,375 M 10 – 6 Greener Pastures Corporation borrowed $1,000,000 on November 1st. The note carried a 9 percent interest rate with the principal and interest payable on June 1st of the following year (1 year note). Required: Show the accounting equation effects and prepare the journal entries for (a) the note issued on November 1 and (b) the interest accrual on December 31. Assets (a) Cash = + 1,000,000 Liabilities + Stockholders’ Equity Notes Payable (short) + 1,000,000 (b) Interest Payable + 15,000 Interest Expense (+E) -15,000 (a) Journal Entry on November 1st (b) Adjusting Journal Entry December 31st Chapter 10 Homework – ACCT 220 7th Edition 2 M 10 – 9 E-Tech Initiatives Limited plans to issue $500,000, 10-year, 4 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 97. Required: How will the bond be reported on the balance sheet if the bonds are issued at 97? Long-term Liabilities Bonds Payable Discount on Bonds Payable Carrying Value $500,000 (15,000) 485,000 or (2) show only the net amount, as follows: Long-term Liabilities Bonds Payable, Net $485,000 The discount is the excess of the face value over the issue price ($485,000 = 97% X $500,000 FV). M 10 – 10 Use the information from M 10 – 9 Assume the bonds are issued at 102. Required: How will the bond be reported on the balance sheet if the bonds are issued at 102? or (2) show only the net amount, as follows: E 10 – 7 Chapter 10 Homework – ACCT 220 7th Edition 3 On January 1, Applied Technologies Corporation (ATC) issued $500,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market interest rate was 10 percent. The bonds pay interest once per year on December 31. Required: 1. Determine the price at which the bonds were issued and the amount that ATC received at issuance. 2. Prepare the journal entry to record the bond issuance. 3. Prepare the journal entry to record the first interest payment on December 31 assuming no interest has been accrued earlier in the year. Requirement 1 Because the stated interest rate was equal to the market interest rate, the bond would have been issued at face value, meaning a quoted price of 100. The amount received at issuance would be $500,000 x 100% = $500,000. Requirement 2: Journal Entry to Record the Issuance of the Bond. Requirement 3: Journal Entry to Record the payment of cash for Interest Expense Chapter 10 Homework – ACCT 220 7th Edition 4 PA 10 – 2 (Use the data from PA 10-1 provided below) Jack Hammer Company completed the following transactions. The annual accounting period ends December 31. Apr. 30 Received $600,000 from Commerce Bank after signing a 12-month, 6 percent, promissory note. June 6 Purchased merchandise on account at a cost of $75,000. (Assume a perpetual inventory system.) July 15 Paid for the June 6 purchase. Aug. 31 Signed a contract to provide security service to a small apartment complex starting in September, and collected six months’ fees in advance, amounting to $24,000. Dec. 31 Determined salary and wages of $40,000 were earned but not yet paid as of December 31 Dec. 31 Adjusted the accounts at year-end, relating to interest. Dec. 31 Adjusted the accounts at year-end, relating to security service. Required: 1. Prepare journal entries for each of the transactions through August 31. 2. Prepare all adjusting entries required on December 31. 3. Show how the liabilities are reported on the balance sheet at December 31. 4. Omit this requirement. Requirement 1 April 30: Cash 600,000 Notes Payable (short-term 600,000 June 6: July 15: August 31: Chapter 10 Homework – ACCT 220 7th Edition 5 PA 10 – 2 Continued Requirement 2 December 31: December 31: Interest Expense ($600,000 x 6% x 8/12) 24,000 Interest Payable 24,000 December 31: Requirement 3 Balance Sheet: Current Liabilities Salaries & Wages Payable $40,000 Interest Payable $24,000 Deferred Revenue (Unearned Revenue) $8,000 Notes Payable $600,000 Total Current Liabilities $672,000 Chapter 10 Homework – ACCT 220 7th Edition 6 Question 1 (1 point) Listen M 10-2 The journal entry to record the sale includes a credit of $400 to Sales Tax Payable. Question 1 options: a) True b) False Question 2 (1 point) Listen PA 10-2 – Requirement 2 On December 31st, interest expense recognized on the note payable is $48,000. Question 2 options: a) True b) False Question 3 (1 point) Listen PA 10-2 – Requirement 1 On June 6, the journal entry to record the purchase of inventory includes a debit to Accounts Payable and a credit to Inventory. Question 3 options: a) True b) False Question 4 (1 point) Listen M 10-6 Part (b) Adjusting Journal Entry on December 31st The journal entry on Dec 31st, includes a debit to Interest Expense of $15,000 and a credit to Interest Payable of $15,000. Question 4 options: a) True b) False Question 5 (1 point) Listen M 10 – 9 Since the bond is issued at 97, the bond would be issued at a discount. Question 5 options: a) True b) False Question 6 (1 point) Listen M 10-1 – Part b Journal Entry to Record Revenue Earned from 1st Show The journal entry to record revenue earned after the 1st show includes a debit to Deferred Revenue (Unearned Revenue) and a credit to Service Revenue. Question 6 options: a) True b) False Question 7 (1 point) Listen Exercise 10 – 7 Requirement 2 Journal Entry to Record the Issuance of the Bond. The journal entry to record the sale of the bond includes a debit to Cash of $500,000 and a credit to Bond Payable of $500,000. Question 7 options: a) True b) False Question 8 (1 point) Listen M 10 – 6 Part (a) Journal Entry on November 1st to Record the Note The journal entry on Nov. 1st, to record the note, includes a debit to Note Payable and a Credit to Interest Payable. Question 8 options: a) True b) False Question 9 (1 point) Listen Exercise 10-7 Bond Payable is a liability account reported on the Balance Sheet. Question 9 options: a) True b) False Question 10 (1 point) Listen M 10 – 3 Net Pay is $40,375. Question 10 options: a) True b) False
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