The company purchased a building December 1, 2017 with a LT Mortgage Payable of
ID: 2576511 • Letter: T
Question
The company purchased a building December 1, 2017 with a LT Mortgage Payable of $300,000 at 8% interest. (Record the purchase of the building.) I. 2. The company issued 1,000 shares of Common Stock for $6,000 on December 25, 2017 On December 29, 2012 the company declared a cash dividend of $3.00 per share for common stock on the shares issued and declared (including the additional 1,000 shares issued on December 25th). 3. 4. The terms of the LT mortgage payable from #1 above require the company to make monthly installment payments over the term of the loan. Each payment consists of interest on the unpaid balance of the loan and a reduction of loan principal. Record the first monthly payment of $3,800 on the LT Mortgage Payable on December 31, 2017. 5. The company last paid interest on the ST note payable on November 1, 2017. Record the accrued interest expense for the last 2 months of 2017. The annual interest rate is 8%. Round to nearest whole dollar 6. The Bonds Payable and related Premium amounts on the Nov. trial balance relate to the Jan. 1, 2017 issuance of the following bonds: On Jan. 1, 2017, the company issued 10%, 10-year bonds when the market rate for similar investments was 8%. The company pays interest each year on January 1st. On Dec. 31, 2017, use the effective interest method of amortizing the premium on bonds payable to accrue the interest expense for 2017. Round your interest expense calculation to the nearest whole dollar. 7. The Unearned Revenue amount on the Nov. trial balance relates to amounts that the company had collected in cash but had not yet been earned. The company completed some of these sales during December and now owes only $10,000 of that unearned revenue. Record the necessary adjustment for December 31, 2017. 8. On December 31, 2017, the company purchased 50 shares of its own Preferred Stock for Treasury Stock for $11 per shareExplanation / Answer
GENERAL JOURNAL Date Account title and explanation Debit Credit Dec1,2017 Properties and Equipments $300,000 Mortgage loan $300,000 (to record purchase of building) Dec25,20 17 Cash $6,000 Common stock $6,000 (To record issue of 1000 common shares) Dec29,2017 Retained earnings $3,000 Dividend payable $3,000 (Common stock outstanding before Dec1 not given) (To record declaration of dividend of $3 per share) Dec31,2017 Interest expenses $2,000 (300000*(0.08/12)= 2000 Mortgage loan $1,800 Cash $3,800 (To record mortgage payment) Dec31,2017 Interest expense $1,333 (Short term Loan amount not given. Assumed loan of $100000) Interest payable $1,333 (interest for two months) (To record interest expense on short term loan) Dec31,2017 Interest expense $8,800 Bond issue premium and bond payable are not given Bond premium $1,200 Assuming an arbitrary amount of $100000 of bond payable Cash $10,000 and premium of $10000:Interest expense=8% of 110000=$8800 (to record interest and amortization on bond payable) Interest payable=10% of $100000=$10000 Dec31,2017 Unearned revenue $30,000 (Nov trial balance is not provided. Assuming as per Sales $30,000 Nov trial balance unearned revernue was $40,000) (To record cpmpletion of sales on unearned revenue) Dec31,2017 Treasury stock-Preferred share $550 Cash $550 (To record purchase of 50 shares of preffered stock @ $11 each) T-ACCOUNTS Date PROPERTIES & EQUIPMENT Debit Credit Dec1,2017 Mortgage loan $300,000 Date MORTGAGE LOAN Debit Credit Dec1,2017 Properties & Equipments $300,000 Dec31,2017 Cash $1,800 Date CASH Debit Credit Dec25,20 17 Common stock $6,000 Dec31,2017 Mortgage loan $1,800 Dec31,2017 (Mortgage) interest expense $1,200 Dec31,2017 Interest expense $8,800 Dec31,2017 Bond premium $1,200 Dec31,2017 Tresury stock $550 Date COMMON STOCK Debit Credit Cash $6,000 Date RETAINED EARNING Debit Credit Dec29,2017 Dividend payable $3,000 Date DIVIDEND PAYABLE Debit Credit Dec29,2017 Retained earning $3,000 Date INTEREST EXPENSE Debit Credit Dec31,2017 Cash $1,200 Dec31,2017 Interest payabl;e $1,333 Dec31,2017 cash $8,800 Date INTEREST PAYABLE Debit Credit Dec31,2017 Interest expense $1,333 Date BOND PREMIUM Debit Credit Dec31,2017 Cash $1,200 Date SALES Debit Credit Dec31,2017 Unearned revenue $30,000 Date UNEARNED REVENUE Debit Credit Dec31,2017 Sales $30,000 Date TREASURY STOCK Debit Credit Dec31,2017 Cash $550 Note: Trial Balance as on Nov end is not provided. Hence Dec31 adjusted trial balance cannot be prepared