13 -21 Current Liabilities and Contingencies borrowed $350,000 on October 1, 201
ID: 2547825 • Letter: 1
Question
13 -21 Current Liabilities and Contingencies borrowed $350,000 on October 1, 2014 and is required to pay $360.000 on 1, 2015. What amount is the interest note payable recorded at on October 1, 2014 and how much is recognized from October 1 to December 31, 2014? a $350,000 and $O b. $350,000 and $6,000. c, $360,000 and so d. $350,000 and $10,000. 95. Parton owes $2 illion that is due on February 28. The company borrows $1,600,000 on to pay down the $2 million note and uch of the $2 illion note is classified as long- February 25 (5-year note) and uses the proceeds uses other cash to pay the balance. How m term in the December 31 financial statements a. $2,000,000. b. $0 C. $1,600,000 d. $400,000 96. Venible newspapers sold 6,000 of annual subscriptions at $125 each on June 1. How much unearned revenue will exist as of December 31? a, so b. $312,500 c. $375,000. d. $750,000. subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions? a. Debit Accounts Receivable for $225,000 b. Credit Sales Taxes Payable for $12,736. c. Credit Sales Revenue for $208,490 d. Credit Sales Taxes Payable for $13,500. 97. Bargain Surplus made cash sales during the month of Octoberf200. Te sales are Company entered into a financing agreement with Cleveland Bank, allowing Higgins Company to borrow up to $6,000,000 at any time through 2016. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. Higgins Company presently has $2,250,000 of notes payable 98. On February 10, 2014, after issuance of its financial statements for 2013, Higgins $3,750,000 under the agreement with Cleveland and liquidate the notes payable to Star National Bank. The agreement with Cleveland also requires Higgins to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common stock without prior approval by Cleveland Bank. From the above information only, the total short-term debt of Higgins Company as of the December 31, 2013 balance sheet date is with Star National Bank maturing March 15, 2014. The company intends to borrow $0. b. $2,250,000 c. $3,000,000 d. $6,000,000.Explanation / Answer
Answer to Question 94:
Option b i.e. $350,000 and $6,000.
The Notes Payable on October 1, 2014 will be recorded at the Value of Notes Payable.
Value of Notes Payable = $350,000
Maturity Value = $360,000
Interest = $360,000 - $350,000
Interest = $10,000
Period of Note Payable = October 1, 2014 to March 1, 2015 = 5 Months
Interest to be recognised on December 31, 2014 = $10,000 * 3/5
Interest to be recognised on December 31, 2014 = $6,000
Answer to Question 95:
Option C i.e. $1,600,000.
The amount of $1,600,000 borrowed on February 25 for a period of 5 year will be classified as Long-Term Debt.
Answer to Question 96:
Option b i.e. $312,500.
Annual Subscription = 6,000 * $125 = $750,000
Period for which Revenue earned = June 1 to December 31 = 7 Months
Period for which Revenue is unearned = 12 – 7 = 5 Months
Unearned Revenue exists on December 31 = $750,000 * 5/12
Unearned Revenue exists on December 31 = $312,500
Answer to Question 97:
Option d i.e. Credit Sales Taxes Payable for $13,500.
The Journal entry to record the Sale will be :
Accounts Receivable 238,500
Sales 225,000
Sales Taxes Payable 13,500
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