Question

Problem 13-2 Various transactions involving liabilities [LO13-2, 13-3, 13-4] Camden Biotechnology began operations in September 2018. The following selected transactions relate to liabilities of the company for September 2018 through March 2019. Camden's fiscal year ends on December 31. Its financial statements are issued in April. 2018 a. On September 5, opened checking accounts at Second Commercial Bank and negotiated a short-term line of credit of up to $19,000,000 at the bank's prime rate (12.5% at the time). The company will pay no commitment fees. b. On October 1, borrowed $16 million cash from Second Commercial Bank under the line of credit and issued a five-month promissory note. Interest at the prime rate of 12% was payable at maturity. Management planned to issue 10-year bonds in February to repay the note. c. Received $3,500 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 $4,140,000. 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. 2019 f. In February, issued $12.4 million of 10-year bonds at face value and paid the bank loan on the March 1 due date. g. Half of the storage containers covered by refundable deposits were returned in March. The remaining containers are expected to be returned during the next six months. Required: 1. Prepare the appropriate journal entries for 2018 and 2019 transactions. 2. Prepare the current and long-term liability sections of the December 31, 2018, balance sheet. Trade accounts payable on that date were $347,000.

Answer 1

Answer's @ Camden biotechnology – Journal entries No Particulars Lcd Debit (5) credit($2 2018 3500 No entry required as money has not been borrowed Cash Al Dr 1 6000 000 Te Notepayable 16000000 Cash Al DT 13500 To liability for refundable de pasilg Accounts receivable Al Dr 4,388,4001 (4,146,000+ 248400) TO Sales revenue 4,140,000 To sales Tax payable (4,140,000X67.) Interest exp(tay. X 16000000X2) To Interest payable 480,000 @ 248406 @ 480,000 2019 Cash To Bonds payable Notes payable Interest payable Interest exp(124. X 16,000,000x2) To cash Liability for refundable depasits (3500xY2) To cash 12400000 18,400, Cooo 480,000 380,000 16,800,000 1750 1750

347,000 3,600,000 4,140,000 @ Current liabilities Accounts payable Current portion of notes payable (16 000 000 - 12400000) Sales tax payable C4,140,000X 67.) Interest parejable diability for refundable deposits Total current liabilities long term liabilities Notes pagable to be refinances on a long term 480,000 3506 8,570,500 12,400,000