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Journal Entries, Adjusting Entries and Note Balance

The following are selected 2007 transactions of Sean Astin Corporation.

Sept 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system.

Oct 1 Issued a $50,000, 12-month. 8% note to Encion in payment of account.

Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note.

Instructions:
(a) Prepare journal entries for the selected transactions above.
(b) Prepare adjusting entries at December 31
(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

Remit in excel

Solution Preview

Please see the attached file

(a)
Sept. 1 Purchases 50,000 Under periodic system it will be recorded under purchases
Accounts Payable 50,000

Oct. 1 Accounts Payable 50,000 The accounts payable is exchanged for ...

Solution Summary

The solution explains the journal entries for the transactions and the adjusting entries. It also explains how to calculate the ending balance for interest bearing and zero interest notes.

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