Question

Seved Ch 13 HW Part 2 Save & E Help Ched 15 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 13 point Mecounts receivable Accounts payable 108 notes, payable to bank Mortgage note payable $ 116,500 44,200 642.000 1,360,000 eBook Other information: Print References 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. Required: 1. Prepare any necessary adjusting journal entries at December 31, 2021, pertaining to each item of other information (a-c). 2. Prepare the current and long-term liability sections of the December 31, 2021, balance sheet. Complete this question by entering your answers in the tabs below. Required: Required 2 Prepare any necessary adjusting journal entries at December 31, 2021, pertaining to each item of other information (o-d). (If no entry is required for a transaction/event, select "No journal entry required in the first account Old) ME < Prey 15 of 15 lii Nox

Answer 1

1.

Transaction	General Journal	Debit	Credit
a.	Interest expense ($642000x 10% x 5/12)	$26750
	Interest payable		$26750
	(To record interest accrued on bank notes payable)
b.	No journal entry required
c.	Accounts receivable	$22750
	Advances from customers		$22750
	(To record advances from customers)
d.	Rent revenue ($37500x 10/12)	$31250
	Unearned rent revenue		$31250
	(To record unearned rent revenue)

b . Reason

Interest has been paid up to December 31.

Given the information, Manufacturing would include $335000 in its current liability section, and the remaining $1025000 in the long-term liability section. The reason is that Manufacturing has (1) the intent to refinance; and (2) demonstrated the ability to refinance in the amount of $1025000 after the end of 2021but before the 2021 financial statements are issued.

2.

Manufacturing Equitable
Balance Sheet (partial)
At December 31, 2021
Current liabilities:
Accounts payable	$44200
Bank notes payable	642000
Mortgage note payable (current portion)	335000
Interest payable	26750
Advances from customers	22750
Unearned rent revenue	31250
Total current liabilities	$1101950
Long-term liabilities:
Mortgage note payable	1025000
Total liabilities	2126950