Based on the information provided create a general journal for the months of Apr

Question

Based on the information provided create a general journal for the months of April through September as it impacts expense, liabilities and equity.
As the first half of 2012 came to a close?the compay was in position to be a leader in the sale of high end computer networking equipment for broadcast media companies. As demand was forecasted to increase to 12,500 units per year over the next 7 years the company invested $600,000 in new equipment to increase the capacity of its manufacturing facility. It financed this new equipment purchase through a combination of debt and equity. In April, CNE received a $300,000 loan from a commercial bank at 7% interest. Starting on May 1st principal and interest payments of 3,500 are to be paid on a monthly basis over 10 years. Also in April, the company issued $300,000 of common stock to a private venture capital firm. 50,000 shares were issued at a par value of $3 per share.
Based on the information provided create a general journal for the months of April through September as it impacts expense, liabilities and equity.
As the first half of 2012 came to a close?the compay was in position to be a leader in the sale of high end computer networking equipment for broadcast media companies. As demand was forecasted to increase to 12,500 units per year over the next 7 years the company invested $600,000 in new equipment to increase the capacity of its manufacturing facility. It financed this new equipment purchase through a combination of debt and equity. In April, CNE received a $300,000 loan from a commercial bank at 7% interest. Starting on May 1st principal and interest payments of 3,500 are to be paid on a monthly basis over 10 years. Also in April, the company issued $300,000 of common stock to a private venture capital firm. 50,000 shares were issued at a par value of $3 per share.

To support sales growth, the company extended generous accounts receivable terms to its customers. As a result, the company’s cash cycle lengthen where inventory and A/R days outstanding reached a combined 90 days in the first half of 2012. To generate more operating cash flow, the company decided to rely more heavily on accounts payable. In June of 2012 all purchases for raw materials were switched from a cash basis to A/P with 2/10, n/30 terms. Based on early payment discounts from its suppliers the company adopted a policy of paying within the 10 day window. Figure 1 on the following page shows the schedule of the company’s raw material purchases by month and when the company paid for each purchase.
As the second quarter of 2012 came to a close profits were at a record high. The company declared a cash and stock dividend at the end of June. The cash dividend was set at $.25 cents per share and the stock dividend was set at 10% of total outstanding stock with a par value of $3 per share. Total outstanding stock at the end of June was 100,000 shares. The dividends were distributed in September. The stock was trading at $6 per share at the time the dividends were declared and distributed.
Assumptions: 1. Do not worry about journalizing accounting entries for revenue, fixed assets, account Assumptions: 1. Do not worry about journalizing accounting entries for revenue, fixed assets, account receivables, or depreciation expense on fixed assets. You will need to account for Cash and Inventory as it relates to expenses, liabilities, and equity. 2. For this exercise ignore calculating and journalizing the current portion of long term debt. receivables, or depreciation expense on fixed assets. You will need to account for Cash and Inventory as it relates to expenses, liabilities, and equity. 2. For this exercise ignore calculating and journalizing the current portion of long term debt. 3. When computing interest, make sure you document the assumptions (i.e., assumed 365 days or 360 days in a year) and show your calculations.  
Raw Materials purchased from Suppliers on Account Date Purchased Purchased Amount Date Paid June 1st July 1st August 1st$ September 1st $ 150,000 June 9th 185,000 July 8th 140,000 September 1st 200,000 September 9th

Explanation / Answer

General Journal Date Account titles and description Debit Credit April Cash $300,000 Loan from Commercial bank $300,000 (to record loan received from commercial bank at 7% interest) April Cash $300,000 Common stock $300,000 (To record common stock issued to private venture capital firm) April Cash $150,000 Common Stock $150,000 (To record common stock issued at par value of $3 per share) May Loan from commercial bank $1,750 Interest expense $1,750 Cash $3,500 (to record monthly installment of loan principal and interest) June Loan from commercial bank $1,702 Interest expense $1,798 Cash $3,500 (to record monthly installment of loan principal and interest) June Inventory $150,000 Accounts payable $150,000 (to record inventory purchased on account) June Accounts payable $150,000 Purchase discount/cash discount $3,000 Cash $147,000 (to record payment made with 2/10 term for inventory) June Retained Earnings $25,000 Dividend payable $25,000 (To record cash dividend declared at the end of June) June Retained earnings $60,000 Common stock dividend distributable $30,000 Paid in capital in excess of par $30,000 (to record stock dividend of 10%) July Loan from commercial bank $1,770 Interest expense $1,730 Cash $3,500 (to record monthly installment of loan principal and interest) July Inventory $185,000 Accounts payable $185,000 (to record inventory purchased on account) July Accounts payable $185,000 Purchase discount/cash discount $3,700 Cash $181,300 (to record payment made with 2/10 term for inventory) August Loan from commercial bank $1,723 Interest expense $1,777 Cash $3,500 (to record monthly installment of loan principal and interest) August Inventory $140,000 Accounts payable $140,000 (to record inventory purchased on account) September Accounts payable $140,000 Cash $140,000 (to record payment made for inventory) September Loan from commercial bank $1,734 Interest expense $1,766 Cash $3,500 (to record monthly installment of loan principal and interest) September Inventory $200,000 Accounts payable $200,000 (to record inventory purchased on account) September Accounts payable $200,000 Purchase discount/cash discount $4,000 Cash $196,000 (to record payment made for inventory on 2/10 terms) September Dividend payable $25,000 Cash $25,000 (To record cash dividend paid) September Common stock dividend distributable $30,000 Common Stock $30,000 (To record stock dividend distributed) Interest Calculation on the assumption of 360 days Month Interest Installment Principal repayment Principal Balance April $300,000 May $1,750.00 $3,500 $1,750.00 $298,250.00 June $1,797.78 $3,500 $1,702.22 $296,547.78 July $1,729.86 $3,500 $1,770.14 $294,777.65 August $1,776.85 $3,500 $1,723.15 $293,054.50 September $1,766.47 $3,500 $1,733.53 $291,320.97

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