Question

Exercise 13-2 The following are selected 2017 transactions of Blue Spruce Corporation. Sept. 1 Purchased inventory from Orion Company on account for $44,400. Blue Spruce uses a periodic inventory system and records purchases using the gross method of accounting for purchase discounts. Oct. 1 Issued a $44,400, 12-month, 9% note to Orion in payment of Blue Spruce’s account. 1 Borrowed $76,800 from the bank by signing a 12-month, non–interest-bearing $80,000 note. Prepare journal entries for the selected transactions above. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Purchases 44400 Accounts Payable 44400 Accounts Payable 44000 Notes Payable 44000 (To record the issue of 9% note) Cash 76800 Notes Payable 76800 (To record borrowing from bank) Prepare adjusting entries at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit (To record interest on 9% note) (To record interest on borrowings) Calculate the net liability, in total, to be reported on the December 31, 2017 statement of financial position for (1) the interest-bearing note, and (2) the non–interest-bearing note. (Round answers to 0 decimal places, e.g. 5,275.) (1) The interest-bearing note $ (2) The non–interest-bearing note $

Answer 1

The total net liability to be reported on the December 31 balance sheet for:

(1) The interest-bearing note = $44400+999 = $45399

(2) The non-interest-bearing note = $80000-$3200+800 = $77600