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 $31,000,000 at the bank's prime rate (9.5% at the time). The company will pay no commitment fees. b. On October 1, borrowed $28 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 $2,700 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 $5,040,000. 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.

Answer 1

Requirement 1) Journal entries : Camden Biotechnology

Transaction	Date	Account tittles and explanation	Debit	Credit
a.	2021	No entry required
b.		Cash a/c	$28000000
		To notes payable a/c		$28000000
c.		Cash a/c	$2700
		To Liability for refundable deposits a/c		$2700
d.		Accounts receivable a/c {Bal}	$5342400
		To sales revenue a/c		$5040000
		To sales tax payable a/c {$5040000*6%}		$302400
e.		Interest expense a/c {$28000000*9%*(3/12)}	$630000
		To interest payable a/c		$630000
	2022
f.		Cash a/c	$25400000
		To bonds payable a/c		$25400000
g.		Notes payable a/c	$28000000
		Interest payable a/c	$630000
		Interest expense a/c {28000000*9%*(2/12)}	$420000
		To Cash a/c		$29050000
h.		Liability for refundable deposits a/c {$2700*(1/2)}	$1350
		To Cash a /c		$1350

Requirement 2) Current and Long term liability sections of the December 31,2021, Balance Sheet

Particulars	Amount($)
Current liabilities
Accounts payable	262000
Current portion of notes payable {$28 million - $25.4 million}	2600000
Sales tax payable	302400
Interest payable	630000
Liability for refundable deposits	2700
Total current liabilities	3797100
Long term liabilities
Note payable	25400000

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