Alex Rodriguez Inc., a publishing company, is preparing its December 31, 2010, f

Question

Alex Rodriguez Inc., a publishing company, is preparing its December 31, 2010, financial statements and must determine the proper accounting treatment for the following situations.

The following items are listed as liabilities on the balance sheet on December 31, 2010.

           Accounts payable $ 420,000

           Notes payable 750,000

           Bonds payable 2,250,000

The accounts payable represent obligations to suppliers that were due in January 2011. The notes payable mature on various dates during 2008. The bonds payable mature on July 1, 2011.

1) Prepare the journal entry that should be recorded as of December 31, 2010.

Explanation / Answer

Date

Account Titles

Debit

Credit

JournalEntries:

Date

Account Titles

Debit

Credit

Dec 31,2010 Supplies $420,000         Account Payable $420,000 (To record supplies due) Dec 31,2010 Cash $750,000     Notes Payable $750,000 (To record issuance of notes) Dec 31,2010 Cash $2,250,000      Bonds Payable $2,250,000 (To record issuance of bonds)

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