1) The following are selected 2012 transactions of Darby Corporation.
| Sept. 1 | Purchased inventory from Orion Company on account for $57,000. Darby records purchases gross and uses a periodic inventory system. | |
| Oct. 1 | Issued a $57,000, 12-month, 8% note to Orion in payment of account. | |
| Oct. 1 | Borrowed $88,390 from the Shore Bank by signing a 12-month, zero-interest-bearing $95,310 note. |
(a) Prepare journal entries for the selected transactions above. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Get Help Now!| Date | Account Titles and Explanation | Debit | Credit |
| Sept 1 | ____________ | ____ | ____ |
____________ ____ ____
Oct 1 ____________ ____ ____
____________ ____ ____
Oct 1 ____________ ____ ____
____________ ____ ____
____________ ____ ____
(b) Prepare adjusting entries at December 31. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
Dec 31 ____________ ____ ____
____________ ____ ____
(To record interest on note)
Dec 31 ____________ ____ ____
____________ ____ ____
(To record discount on note)
(c) Compute the total net liability to be reported on the December 31 balance sheet for:
| (i | The interest-bearing note | $_____________ | ||
| (ii | The zero-interest-bearing note | $_____________ |
Date
Acc
Question 2
Selzer Equipment Company sold 629 Rollomatics during 2012 at $6,750 each. During 2012, Selzer spent $32,200 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
(a) Prepare 2012 entries for Selzer using the expense warranty approach. Assume that Selzer estimates the total cost of servicing the warranties will be $161,000 for 2 years. Use “Inventory” account to record the warranty expense. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation Debit Credit
1. ___________________ __________ __________
___________________ __________ __________
(To record the sale)
2. ___________________ __________ __________
____________________ __________ __________
(To record the warranty expense)
3. ___________________ __________ __________
____________________ __________ __________
(To record the warranty liabilitiy)
(b) Prepare 2012 entries for Selzer assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $179,500 relates to sales of warranty contracts. Selzer estimates the total cost of servicing the warranties will be $161,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs. Use “Inventory” account to record the warranty expense. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation Debit Credit
1. _________________________ __________ __________
__________________________ __________ __________
___________________________ __________ __________
(To record the sale)
2. __________________________ __________ __________
__________________________ __________ __________
(To record the warranty expense)
3. __________________________ ___________ ___________
__________________________ ___________ ___________
(To record the estimated revenues)
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