Question

Complete the following Journal Entries:

1. 1) On October 2nd, REI received the full payment (interest and principal) for the three-month $41,325 note issued on July 1st (transaction #1 – quarter 3). The interest received is for 3 months.

2. 2) REI felt that their inventory levels were getting lower and they should purchase more units from EDL. On October 4th, REI purchased on account 500 DoorSpy units at $56 each.

3. 3) On October 6th, Ella got a call from Larry who is a manager of multiple apartment complexes and heard about how well the DoorSpy was working at other apartments in the city. Larry placed an order for 400 DoorSpy units at $90 each plus $55 each for installation. Larry mentioned he was a bit short on cash currently, but when rent comes due on November 1st, he should be able to pay the full amount. REI agreed to extend him credit for this purchase and delivered the DoorSpy units on October 6th with installation to take place in a week.

4. 4) On October 9th, REI received payment in full from Saskatoon Co-op. This sale was made during September (transaction/event #25 – quarter 3).

5. 5) On October 13th, REI completed the installation from the sales transaction #3.

6. 6) On October 23rd, REI purchased and paid cash for office supplies costing $2,350.

7. 7) On October 31st, REI received and paid $425 for the telephone bill for the month of October.

8. 8) On October 31st, REI also received and paid $570 for the utility bill for the month of October.

9. 9) On the advice of a brilliant financial accounting student who was a good friend of Ella’s, REI decided it was better off to purchase a building rather than continue renting. On November 1st, REI got out of the warehouse and office rental agreement at no cost to REI. REI received a cash refund for all amounts prepaid and not used up as of November 1st, 2018. They found a building to purchase at a total cost of $200,000, which contained an office and warehouse space for REI’s inventory. The cost was all for the building (i.e. no land allocation). REI did not have the money to finance this purchase, so they borrowed $200,000 from the bank by signing a 10-year installment note. The bank placed a loan covenant on the note requiring REI to have a debt-to- equity ratio no larger than 1.1 at any fiscal year end. The installment note has

an annual interest rate of 5.5% and monthly blended payments are due at the end of every month starting November 30. (Hint: Use an amortization table to calculate the monthly blended payments.) The building is expected to last 40 years and REI felt it was appropriate to depreciate the building using the straight-line method.

10. 10) REI felt it should once again build up its current inventory levels, thus On November 3rd, they purchased on account 500 DoorSpy units at $60 each.
    The increased cost was due to an increase in the cost of materials to manufacture the DoorSpy, and EDL was passing this additional cost onto REI.

11. 11) During the month of November REI made the following sales with installation to take place 1 week later:

    •  Nov 6 - 150 DoorSpy units at $90 each plus $55 each for installation, on account to Saskatoon Co-op

    •  Nov 15 - 150 DoorSpy units at $90 each plus $55 each for installation, on account to Princeton Inc.

    •  Nov 22 - 180 DoorSpy units at $90 each plus $55 each for installation, on account to Regina Public Schools.

12. 12) On November 30th REI received and paid $415 for the telephone bill for the month of November.

13. 13) On November 30th REI received and paid $505 for the utility bill for the month of November.

14. 14) On November 30th, REI paid their first payment on the installment note.

15. 15) On December 4th REI paid $28,000 on its account owing to EDL (transaction/event #2 – quarter 4).

16. 16) Reigh had been looking at the accounts receivable account and was worried that this balance is getting too high. She made multiple calls to the various customers that had purchased units as far back as May, wanting to ask if they were going to pay their accounts anytime soon. She was concerned with the number of customers who didn’t return her call or didn’t answer at all. After discussion with Ella, Reigh decided to call a receivable factoring company to see if they wanted to purchase their receivables from the miscellaneous customers only, not the corporate accounts or apartment manager accounts. Reigh called Webreakem Inc. and they happily agreed to buy the miscellaneous receivables of REI for a fee of 3% of the total amount outstanding. On December 12th, REI sold their miscellaneous receivables to Webreakem Inc. at this 3% cost.

17. 17) On December 22nd, REI received payment in full from Saskatoon Co-op. This sale was made during November (transaction/event #11 – quarter 4).

18. 18) On December 26th, REI received payment in full from Princeton Inc. This sale was made during November (transaction/event #11 – quarter 4).

19. 19) On December 29th REI received and paid $420 for the telephone bill for the month of December.

20. 20) On December 29th REI received and paid $550 for the utility bill for month of December.

21. 21) On December 29th, REI did a physical count of their office supplies. The count indicated they had $480 of office supplies on-hand.

22. 22) Reigh decided to look closely at the remaining accounts receivables as at December 29th to determine an accurate assessment of the collectibility of the accounts. She decided to apply the same aging analysis and rates as last quarter.

23. 23) On December 29th, REI paid another payment on the installment note.

Hint – Do not forget about the transactions/events that occurred in the prior quarters that would affect this quarter (for example office and warehouse rent, the prepaid expenses, wages, depreciation, income taxes).

Answer 1

Answer 1:

The journal entry would be:

Cash/Bank (Debit)                           $45,458

                To Note receivable (Credit)         $41,325

                To Interest revenue (Credit)       $4,133

As the interest rate is not provided, a rate of 10% is assumed.

Please note for each additional question you need to create separate questions.