Question

The unadjusted trial balance of the Manufacturing Equitable at December 31, 2021, the end of its fiscal year, included the following account balances. Manufacturing's 2021 financial statements were issued on April 1, 2022. $ Accounts receivable Accounts payable 10% notes, payable to bank Mortgage note payable 112,500 42,600 612,000 1,390,000 Other information: a. The bank notes, issued August 1, 2021, are due on July 31, 2022, and pay interest at a rate of 10%, payable at maturity. b. The mortgage note is due on March 1, 2022. Interest at 9% has been paid up to December 31 (assume 9% is a realistic rate). Manufacturing intended at December 31, 2021, to refinance the note on its due date with a new 10-year mortgage note. In fact, on March 1, Manufacturing paid $430,000 in cash on the principal balance and refinanced the remaining $960,000. C. Included in the accounts receivable balance at December 31, 2021, were two subsidiary accounts that had been overpaid and had credit balances totaling $20,750. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases. d. On November 1, 2021, Manufacturing rented a portion of its factory to a tenant for $34,500 per year, payable in advance. The payment for the 12 months ended October 31, 2022, was received as required and was credited to rent revenue. Required: 1. Prepare any necessary adjusting journal entries at December 31, 2021, pertaining to each item of other information (a-d). 2. Prepare the current and long-term liability sections of the December 31, 2021, balance sheet.

Answer 1

| Answer to Date a. b. Particulars Debit C$) credit () Interest Expenses ($612,000x10].XS/12)Al $25,500 To Accrued Interest payable $25,500 (Being to record the interest expense accured on bank notes for s month) No journal entry required No entry is reguired for the interest accured as it is already paid till &c 3). Accounts Receivable Alc or $20,750 To Deferred Revenue $20.750 (Being to record the adjustment of ever Payment) Rent Revenue ($34,500x 10/12) Alcor $28,750 To Def erred Rent Revenue (Being to record the rent revenue deferred during the year $28.750 - Balance sheet(Partiales.on Dec 31, 2022. Liabilities and share holder i Equity Current liability: Accounts payable Bank Notes payable current portion of long term debt Interest payable Advances from customers Deferred rent revence Total corrent liability Long term liabilities: mort agage notes payable Total long term liabilities Total liabilities $ 48,600 $610,000 $430,000 $25,500 $ 20,750 $28.750 $1,159,600 $960,000 $ 960,000 $2,119,600