The following are selected 2012 transactions of Darby Corporation.
Sept. 1 Purchased inventory from Orion Company on account for $54,700. Darby records purchases gross and uses a periodic inventory system.
Oct. 1 Issued a $54,700, 12-month, 8% note to Orion in payment of account.
Oct. 1 Borrowed $84,080 from the Shore Bank by signing a 12-month, zero-interest-bearing $89,960 note.
(b) Prepare adjusting entries at December 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
(To record interest on the note)
(To record discount on the note)
(c) Compute the total net liability to be reported on the December 31 balance sheet for:
(1) The interest-bearing note $ __________
(2) The zero-interest-bearing note $__________
The solution analyzes the transactions of the Darby Coporations and calculates what the question demands with step-by-step workings and all formulas shown in excel spreadsheet.