Question

Camden Biotechnology began operations in September 2021. The following selected transactions relate to liabilities of the company for September 2021 through March 2022. Camden's fiscal year ends on December 31. Its financial statements are issued in April. 2021 a. On September 5, opened checking accounts at Second Commercial Bank and negotiated a short-term line of credit of up to $23,000,000 at the bank's prime rate (9.5% at the time). The company will pay no commitment fees. b. On October 1, borrowed $20 million cash from Second Commercial Bank under the line of credit and issued a five-month promissory note. Interest at the prime rate of 9% was payable at maturity. Management planned to issue 10-year bonds in February to repay the note. c. Received $1,800 of refundable deposits in December for reusable containers used to transport and store chemical-based products. d. For the September-December period, sales on account totaled $4,740,000. The state sales tax rate is 3% and the local sales tax rate is 3%. (This is a summary journal entry for the many individual sales transactions for the period.) e. Recorded the adjusting entry for accrued interest. 2022 f. In March, paid the entire amount of the note on its March 1 due date, using proceeds from a February issuance of $17.5 million of 10- year bonds at face value, along with other available cash. g. The storage containers covered by refundable deposits are expected to be returned during the first nine months of the year. Half of the containers were returned in March 2022. Required: 1. Prepare the appropriate journal entries for items a-g. 2. Prepare the current and long-term liability sections of the December 31, 2021, balance sheet. Trade accounts payable on that date were $296,000.

Answer 1

	Answer
Answer-1			Particulars	Debit	Credit
	1	a	No Journal Entry Required
	2	b	Cash	$        2,00,00,000
			Notes Payable		$        2,00,00,000
	3	c	Cash	$                  1,800
			Liability—refundable deposits		$                  1,800
	4	d	Accounts receivable	$           50,24,400
			Sales revenue		$           47,40,000
			Sales taxes payable		$             2,84,400
	5	e	Interest expense	$             4,50,000
			Interest payable		$             4,50,000
	6	f1	Cash	$      17,50,00,000
			Bonds Payable		$      17,50,00,000
	7	f2	Interest Expense	$             3,00,000
			Interest Payable	$             4,50,000
			Notes Payable	$        2,00,00,000
			Cash		$        2,07,50,000
	8	g	Liability—refundable deposits	$                     900
			Cash		$                     900

Answer-2	Balance Sheet
	At December 31,2021
	Current Liabilities
	Sales taxes Payable	$        2,84,400
	Accrued Interest Payable	$        4,50,000
	Current Portion of Bank Loan	$      25,00,000
	Liabilitiy -Refundable Deposits	$             1,800
	Accounts Payable	$        2,96,000
	Total Current Liabilities	$      35,32,200
	Long Term Liabilities
	Bank loan to be Financed	$ 17,50,00,000
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