Probiems (Group B) Journalizing liability P11-31B The following transactions of

Question

Probiems (Group B) Journalizing liability P11-31B The following transactions of Pan-American Paper Company during 2006 and 2007 2006 Feb. 3 Purchased equipment for $40,000, signing a six-month, 9% note payable. Recorded the week's sales of $60,000, one-third for cash, and two-thirds on credit. All sales amounts are subject to a 5% sales tax. Sent last week's sales tax to the staté. 28 Mar. 7 584 Chapter 11 Borrowed $100,000 on a long-term, 9% note payable that calls for annual payment of interest each April 30. Paid the six-month, 9% note at maturity. Purchased inventory at a cost of $7,000, signing a three- month, 6% note payable for that amount. Accrued warranty expense, which is estimated at 3% of sales of $200,000. Apt 30 3 Aug. Nov. 30 Dec. 31 1 Accrued interest on all outstanding notes payable. Make a separate interest accrual entry for each note payable. 2007 Feb. 28 Apr. 30 Paid off the 6% inventory note, plus interest, at maturity. Paid the interest for one year on the long-term note payable. Record the transactions in Pan American's general journal. Explanations are not required. (pp. 551-552, 554)

Explanation / Answer

Discription Debit Credit 1 Equipment $40,000 To 9% Note Payable $40,000 2 Debtors $42,000 Cash $21,000 To sales $60,000 To Sales Tax Payable $3,000 3 Sales Tax Payable $3,000 To Bank $3,000 4 Bank A/C $100,000 to Long Term 9 % Note Payable $100,000 5 9% Note Payable $40,000 Interest on Note $1,800 To Bank $41,800 6 Purchases $7,000 To 6% Note Payable $7,000 7 Warranty Expenses $6,000 To Accrued Warranty Expenses $6,000 8 Interest on 9 % Note $6,000 To Accrued Interest on 9% Note $6,000 9 Interest on 6 % Note $35 To Accrued Interest on 6% Note $35 10 To 6% Note Payable $7,000 Interest on 6 % Note $175 Accrued Interest on 6% Note $35 To Bank $7,210 11 Accrued Interest on 9% Note $6,000 Interest on 9 % Note $3,000 To Bank $9,000

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