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 116,500 44,200 642,000 1,360,000 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 $335,000 in cash on the principal balance and refinanced the remaining $1,025,000. c. Included in the accounts receivable balance at December 31, 2021, were two subsidiary accounts that had been overpaid and had credit balances totaling $22.750. 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 $37,500 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

Answer 1

Part 1

No.	Transaction	General journal	Debit	Credit
1	a	Interest expense	26750
		Interest payable (642000*10%*5/12)		26750
2	b	No journal entry required
3	c	Accounts receivable	22750
		Deferred revenue		22750
4	d	Rent revenue (37500*10/12)	31250
		Deferred revenue		31250

Part 2

Current liabilities
Accounts payable	44200
Notes payable	642000
Current portion of long-term debt	335000
Interest payable	26750
Advances from customers	22750
Unearned rent revenue	31250
Total current liabilities	$1101950
Long-term liabilities:
Mortgage note payable	$1025000