Question

Question 16

Note 1. One April 1 of the current year warren corporation received $30,000, 10 percent note from a customer in settlement of a $30,000 open account receivable. According to the terms, the principal of the note interest are payable at the end of 12 months. The annual accounting period for Warren ends on December 31.

Note 2 On August 1 of the current year, to meet a cash shortage. Warren Corporation obtained a $30,000. 12 percent loan from a local bank. The principal of the note and interest expense are payable at the of six month.

Requirement

For the relevant transaction dates of each note, indicates the amounts and the direction of effects, on the elements of the balance sheet and income statement.

(Reminder. Assets=Liabilities +Stockholders Equity; Revenues-Expense=Net income. And Net income accounts are closed to Retained Earnings), a part of Stockholders equity. (Do not net the transaction effects. Indicate a decrease with a negative amount.)

Balance sheet                                         Income statement

Date                                            Assets    Liabilities         Stockholders Equity      Revenues     Expenses      Net Income

April 1                  (current year)

April 1                  (current year)

December 31      (current year)

March 31            (next year)

March 31            (next year)

Note 2

August 1             ( current year)

December 31    (current year)

January 3          (next year)

Answer 1

Answer
	Balance  Sheet			Income Statement
Date	Assets	Liabilities	Stockholders' Equity	Revenue	Expenses	Net Income
Note 1
April 1 (current year)	$   30,000
April 1 (current year)	$ -30,000
December 31 (current year)	$     2,250		$ 2,250	$2,250		$ 2,250
March 31 (next year)	$   33,000		$     750			$     750
March 31 (next year)	$ -32,250
Note 2
August 1 (current year)	$   30,000	$ 30,000
December 31 (current year)		$   1,500	$ -1,500		$     1,500	$ -1,500
January 31 (next year)	$ -31,800	$-31,500	$    -300		$        300	$    -300

journal entries
Date	General Journal	Debit	Credit
Note 1
Apr. 1	Notes receivable	$ 30,000
	Accounts receivable		$30,000
Dec. 31	Interest receivable ($30000 x 10% x 9/12)	$   2,250
	Interest revenue		$ 2,250
Mar. 31	Cash	$ 33,000
	Notes receivable		$30,000
	Interest receivable		$ 2,250
	Interest revenue ($30000 x 10% x 3/12)		$     750
Note 2
Aug. 1	Cash	$ 30,000
	Notes payable		$30,000
Dec. 31	Interest expense ($30000 x 12% x 5/12)	$   1,500
	Interest payable		$ 1,500
Jan. 31	Notes payable	$ 30,000
	Interest payable	$   1,500
	Interest expense ($30000 x 12% x 1/12)	$      300
	Cash		$31,800
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