Jack Hammer Company completed the following transactions. The annual accounting
ID: 2575978 • Letter: J
Question
Jack Hammer Company completed the following transactions. The annual accounting period ends December 31.
Received $495,000 from Commerce Bank after signing a 12-month, 5 percent, promissory note.
Purchased merchandise on account at a cost of $68,000. (Assume a perpetual inventory system.)
Signed a contract to provide security service to a small apartment complex and collected six months’ fees in advance amounting to $19,800. (Use an account called Unearned Revenue.)
Determined salary and wages of $33,000 were earned but not yet paid as of December 31 (ignore payroll taxes).
Complete the required journal entries for each of the above transactions. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1. Record the borrowing of $495,000.
2. Record the purchase of inventory worth $68,000 on account.
3. Record the payment for inventory in full.
4. Record the collection of six month’s security service fees in advance amounting to $19,800.
5. Record the wages earned, but not yet paid as of December 31.
6. Record the adjusting entry relating to interest.
7. Record the adjusting entry relating to security service fees.
Show how all of the liabilities arising from these items are reported on the balance sheet at December 31. (Do not round intermediate calculations.)
Jack Hammer Company completed the following transactions. The annual accounting period ends December 31.
Explanation / Answer
Date Particulars Debit $ Credit $ Apr 30 Cash 495,000 Notes Payables 495,000 Jun 6 Inventory 68,000 Accounts Payables 68,000 July 15 Accounts Payables 68,000 Cash 68,000 Aug 31 Cash 19,800 Unearned Service Revenue 19,800 Dec 31 Salaries and Wages 33,000 Salaries and Wages Payables 33,000 Dec 31 Interest Expenses 16,500 Interest Payables 16,500 (495000*5%)*8/12 Dec 31 Unearned Service Revenue 13,200 Service Revenue 13,200 (19800*4/6) Partial Balance sheet Current Liabilities Notes Payables 495,000 Interest Payables 16,500 Unearned Service Revenue 6,600 Salaries and Wages Payables 33,000 Total Current Liabilities 551,100
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