604 chapter 11 Problems Group A PI1-3IA Journalizing liability transactions and

Question

604 chapter 11 Problems Group A PI1-3IA Journalizing liability transactions and reporting them on the balance Learning objectives 1, 5 sheet 1, Mar. 1, 2017, Mortgage Payable DR $4,710 54.0 The following transactions of Smith Pharmacies occurred during 2016 and 2017: $345,998 2016 Borrowed $240,000 from Naples Bank. The eight-year, 7% note requires payments due annually, on March 1. Each payment consists of $30,000 principal plus one year's interest Mar. 1 Mortgaged the warehouse for $150,000 cash with Sawyer Bank. The mortgage requires monthly payments of $6,000. The interest rate on the note is 1 1% and accrues monthly The first payment is due on January 1, 2017 Recorded interest accrued on the Sawyer Bank note. Dec. 1 31 31 2017 Recorded interest accrued on the Naples Bank note. Jan. 1 Paid Sawyer Bank monthly mortgage payment. Feb. 1 Paid Sawyer Bank monthly mortgage payment Mar. 1 Paid Sawyer Bank monthly mortgage payment. 1 Paid first installment on note due to Naples Bank. Requirements 1. Journalize the transactions in the Smith Pharmacies general journal. Round all answers to the nearest dollar. Explanations are not required. 2. Prepare the liabilities section of the balance sheet for Smith Pharmacies on March 1, 2017 after all the journal entries are recorded.

Explanation / Answer

Journal Entries in the books of Smith Pharmacies Date Particulars $ $ Workings 31-Dec Dr. Interest on Sawyer Bank a/c 1375 150000*11%/12=1375 Cr. Interest Due to Sawyer Bank a/c 1375 31-Dec Dr. Interest on Naples Bank a/c 16800 240000*7%=16800 Cr. Interest Due to Naples Bank a/c 16800 1-Jan Dr. Sawyer Bank a/c 4625 6000-1375 Dr. Interest Due to Sawyer Bank a/c 1375 Cr. Bank a/c 6000 1-Feb Dr. Sawyer Bank a/c 4667 6000-1333 Dr. Interest Due to Sawyer Bank a/c 1333 150000-4625*11%/12 Cr. Bank a/c 6000 1-Mar Dr. Sawyer Bank a/c 4710 6000-1290 Dr. Interest Due to Sawyer Bank a/c 1290 150000-4625-4667*11%/12 Cr. Bank a/c 6000 1-Mar Dr. Note due to Naples Bank a/c $13,200 Dr. Interest on note due to Naples Bank a/c $16,800 240000*7% Cr. Bank a/c $30,000 Balance Sheet of Smith Pharmacies Liabilities Long Term Borrowings: Sawyer Bank              135998   (150000-4625-4667-4710) Note due to Naples bank    210000   (240000-30000)

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