Question

On September 1, Sky Mountain Co borrowed $51,000 on a 8% , 9-month note payable to Coast National Bank. Given no previous adjusting entries have been recorded, Sky Mountain's adjusting entry four months later at December 31 would include a Multiple Choice debit to Interest Expense of $4.080 debit to Interest Expense of $1.020 debit to Interest Expense of $3,060 debit to Interest Expense of $1360

Answer 1

1) Answer: Debit to interest expense of S1,360. Workings: Debit Credit Date General Journal Interest Expense ($51,000 Interest Payable Dec.31 8%* 4/12) $1,360 $1,360 2) Answer: Debit dividends and credit dividends payable for $34,500. Workings: General Journal Debit Credit Dividends (46,000 S0.75) Dividends Payable $34,500 $34,500 Note: Dividends are declared on the oustanding common stock. 3) Answer: The potential dividend to preferred stockholders is S8 per share per year. Workings: The fixed dividend per share is $8 (8% * $100) 4) Answer: $120,000 Workings: Issue of new share common stock (2,000 shares S5) $10,000 Additionalpaid-incapital (2,000 shares $15) Add: Net income for the period $30,000 $100,000 Less: Payment of cash dividends Change in stockholders equity S20,000 $120,000