Question

Exercise 13-02

The following are selected 2020 transactions of Pina Corporation.

Sept. 1		Purchased inventory from Encino Company on account for $56,000. Pina records purchases gross and uses a periodic inventory system.
Oct. 1		Issued a $56,000, 12-month, 8% note to Encino in payment of account.
Oct. 1		Borrowed $56,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $61,040 note.

Prepare journal entries for the selected transactions above.

Date Account Titles and Explanation Debit Credit October 1

Prepare adjusting entries at December 31

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		$

Answer 1

Salution: 12. Jowinal Entries for the selected transactions :- Date Account Titles & Explanation Debit ($) Credit ($)] September 1 Purchase Ale Dr. $56,000 To Accounts Payable Alc $56,000 (To record the purchase che Merchandise inventory on account) October 1 Accounts Payable Al Dr $56,000 To Notes payable to $56,000 (To ou lord Payment of accounts Payable October 1 I Cash All Dr. I $56,000 Disc. on nate payable Al Ovi $5040 (Bal. fig.) To Notes Payable Alc $61,040 To record signing a note Payasli) Credit($) $1120 2. Adjusting Entries : Date Account Titles & Explanation Debit ($) December 3) Interest Expenses Alcor, $1120 ($56,000X8 %.x3/12) To Interest Payable Alc (to record interest on the note) Decembe43) Interest Expenses Alle adr. $1260 ( $5040 x 3/12) To Discount on Wóte payable 1 (Toguecord discount on the Note) $1260

3). 1 Total Net Liability Interest Beasing Note = Note Payable + Interest Expenses = $56,000 + $1120 =$57,120 2. zero Interest Bearing Note = Notepayable + Interest Expenses = $56.000 + $1,360 = $57260