CUMULATIVE REVIEW PROBLEM: CHAPTER 8 The purpose of this problem is to provide a
ID: 2411397 • Letter: C
Question
CUMULATIVE REVIEW PROBLEM: CHAPTER 8 The purpose of this problem is to provide an opportunity to revieno both new concepts in the curre chapter and major concepts in precious chapters. This cumulative review should assist you i integrating accounting concepts and preparing for exams. REQUIRED: Answer each of the following seven questions: Use the following information to answer the next two questions: Meg Co. borr wed $300,000 by giving a 16%,90 day, $300,000 note payable dated May 14, 2011 at Tolland Bank. Interest is payable at the maturity date. 1. The maturity date of Meg Co.'s note would be: 2. At maturity, Meg Co. should record the payment of the note with a journal entry that would include: A. a debit to Cash for $348,000 B. a debit to Interest Expense for $48,000. C. a credit to Cash for $348,000. D. a credit to Notes Payable for $300,000. E. None of the above.Explanation / Answer
Answer:
1.Maturity Date : 12th August 2011
2.Meg Co.:E.None of the above
At Maturity:
Note Payable a/c Dr. 300000
Interest Expense a/c Dr. 12000
To Cash 312000
Interest = 300000 x 16% x 90/360 = 12000
3.Jack Company:A.Debit to interest expense $3000
Adjusting Entry at December 31
Interest expense a/c Dr. 3000
To Interest Payable 3000
80000 x 15% x 90/360 = 3000
4.Terry Corporation:A.Debit to Interest Receivable
Adjusting Entry at December 31
Interest Receivable a/c Dr. 1200
To Interest Revenue 1200
80000 x 12% x 45/360 = 1200
Peg Company
5.Current Assets = Cash + Accounts Receivable - Allowance for bad debts + Office Supplies + Inventory + Prepaid Insurance = 30000 + 80000 - 800 + 1500 + 25000 + 9000 = $144700
6.Total Long Term Assets = Land + Equipment - Accumulated Depreciation - Equip = 30000 + 80000 - 6000 = 104000
7.Total Current Liabilities = Unearned Revenue + Accounts Payable = 5000 + 50000 = 55000