Question

13.1 (LO Current Liability Entries and Adustment red below are certain transactions of Shark Company. The company uses the periodic inventory system 1 On March 10, the company purchased goods from Bait Company for $12,000 subject to cash discount terms of 1/10, 1/30. c e and counts payable are recorded by the company at grow amounts. The invoice was paid on March 19. 2 On April 1, the company borrowed $172,000 from Omega National Bank by signing a $200,000 nero in en due two years from April 1. 1 On June 30, the company bought a fishing boat for $10,000 from Open Water Corporation, paying $6,000 in cash and sign Ing a two-year, 8% note for the balance of the purchase price 4 On September 8, the board of directors declared a $65,000 cash dividend that was payable on October 15 to stockholders of record on September 25. Instructions Make all the journal entries necessary to record the transactions above using appropriate dates! 6) Shark Company's year-end December 31. Auming that no adjusting entries relative to the transactions above have been recorded, prepare any adjusting journal entries concering interest that are necessary to present fair financial statements at December 31. Assume straight-line amortization of discounts

Answer 1

13.1B
(a)

Date	Account Titles	Debit	Credit
Mar-10	Purchase	$              42,000
	Accounts Payable		$              42,000
	(Goods purchased on account)
Apr-01	Cash	$           1,72,000
	Discount on Notes Payable	$              28,000
	Notes Payable		$           2,00,000
	(Borrowed funds on zero interest bearing note)
Jun-30	Fishing Boat / Equipment	$              40,000
	Cash		$                 6,000
	Notes Payable		$              34,000
	(Bought fishing boat by paying part cash)
Sep-08	Retained Earnings / Cash Dividend	$              65,000
	Dividend Payable		$              65,000
	(Cash dividend declared)
Oct-15	Dividend Payable	$              65,000
	Cash		$              65,000
	(Cash dividend paid)

(b)

Date	Account Titles	Debit	Credit
Dec-31	Interest Expense	$              10,500		=28000/24*9
	Discount on Notes Payable		$              10,500
	(Discount amortized for 9 months)
Dec-31	Interest Expense	$                1,360		=34000*8%*6/12
	Interest Payable		$                 1,360
	(Interest accrued but not paid)

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