Question

BUSI 1043 Summer 2020 Final Version - saved M File Home Table Open in Desktop App O Search B 1 E. book value per common share of stock mchat Page Break mind Question 4 (20 marks) Unit 7 - Liabilities a. Fixer Upper Housing Limited purchased equipment costing $150,000 on October 1, 2019, by paying 10% down and signing an 8% 9-month note payable for the balance. Fier Upper Housing Limited's year end is December 31 Prepare journal entries to record the purchase of the equipment, the accrual of interest on December 31, and the payment of the note at maturity. For ease of computation assume that Fixer Upper calculates interest expense based on the number of months, outstanding rather than the number of days. b Determine the balance of any current liabilities associated with the note as of December 31, 2019 3 Debit Credit Type here to search O hop G Н. B. N

Answer 1

a.

Date Account Ref. Debit Credit Oct-01 Equipment $ 150,000 Cash $ 15,000 $ 135,000 Note payable (Purchased equipment) $ 2,700 135,000 x 8% x 3/12 Dec-31 Interest expense Interest payable (Interest accrued) $ 2,700 $ 135,000 Jun-30 Note payable Cash (Note payable paid) $ 135,000 135,000 x 8% x 6/12 $ $ 5,400 2,700 Jun-30 Interest expense Interest payable Cash (Interest paid) $ 8,100

b.

Balances on 31 dec :-

Note payable = 135,000

Interest payable = 2,700