Should number 17 be recorded as a cash payment or exactly like number 18 in the

Question

Should number 17 be recorded as a cash payment or exactly like number 18 in the worksheet in interest payable?

Assets Liabilities Equity Cash Flow Cash AR Allowance Inventory Prepaid Equip Acc. Dep. AP Unearn Rev Int. Pay Warranty Note Pay Bonds Stock R.E. Rev Exp 1. January 1, 2010 2. Sold $200,000 in stock 3. Paid $12,000 for 1 year of rent 4. Received $24,000 for services to be delivered over the coming 12 months 5. Purchased equipment - $30,000, 2% discount, FOB shipping of $600 During the year: 6. On April 1, borrowed $10,000 at 3% interest per year. Interest is payable semi-annually. 7. Purchased inventory on account, $82,000. 8. Sold inventory for $90,000 on account. 9. The inventory had cost $62,000. 10. Collected $81,000 of the sales on account. 11. Paid $82,000 on accounts payable. 12. Purchased inventory on account, $96,000. 13. Paid $70,000 of the accounts payable. 14. Paid salaries of $20,000 15. Estimated that 2% of sales on account will be uncollectible 16. Depreciated equipment using SL, 5-year life, $5,000 estimated salvage 17. Recorded interest on the loan - first semi-annual payment 18. Recorded interest on the loan - year-end adjustment (3 months) 19. Received notice of a lawsuit from a customer. 20. The attorneys believe there is no legal basis. 21. Rent expense 22. Earned Revenue Ending Balance $          -   $        -   $        -   $         -   $        -   $        -   $        -   $        -   $          -   $        -   $        -   $        -   $        -   $         -   $          -   $         -   $         -   $          -   Total Assets $          -   Total Liabilities and Equity $          -  

Explanation / Answer

Transaction number 17 must be recorded as cash payment. It is given that first semi-annual interest payment made, which means $150 ($10,000×3%× 6/12) is paid as semi-annual payment. This transaction increases interest expenses account and decreases cash account by $1,500.

Transaction number 18 is year end adjusting entry for interest on loan. This adjustsing entry increases interest expenses account and increases interest payable account by $75 ($10,000×3%× 3/12).

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.