Question
In: Accounting
v The statement of financial position on December 31, 2011, and 2012 for Majan Manufacturing Company...
v
- The statement of financial position on December 31, 2011, and 2012 for Majan Manufacturing Company includes the liabilities listed below:
2011
- On September 15th, 2011, Majan company purchased Inventory from a supplier on credit for $250,000.
- On October 1st, 2011, Majan borrowed 12 million cash and issued nine months, 12% promissory note. Interest was payable at maturity.
- On November 1, 2011, Majan rented a portion of its factory to a tenant for $15,000 per year, payable in advance. The payment for the 12 months ended October 31, 2012, was received as required and was credited to rent revenue.
- During December, received $6,500 of refundable deposits relating to containers used to transport equipment parts.
- During December, credit sales totaled $30,000. The state sales tax rate is 7%. (This is a summary journal entry for many individual sales transactions for the period.)
- On December 31st, 2011, Majan received part of the storage containers covered by refundable deposits which worth $3,200. The remaining are expected to be received after two years.
- Recorded the adjusting entry for accrued interest at the end of December 2011.
2012
- Mortgage note of $1,200,000 is due on March 1st, 2012. Interest at 9% has been paid up to December 31st. Majan intended on December 31, 2011, to refinance the note on its due date with new 8 years mortgage note to the same noteholders. On March 1st, Majan paid $300,000 in cash on the principle balance and refinanced the remaining.
Required: [ 11 Marks]
- Prepare the appropriate journal entries for the transactions above related to 2011.
Prepare the current and long-term liability sections of December 31, 2011, statement of financial position.
- The statement of financial position on December 31, 2011, and 2012 for Majan Manufacturing Company includes the liabilities listed below:
2011
- On September 15th, 2011, Majan company purchased Inventory from a supplier on credit for $250,000.
- On October 1st, 2011, Majan borrowed 12 million cash and issued nine months, 12% promissory note. Interest was payable at maturity.
- On November 1, 2011, Majan rented a portion of its factory to a tenant for $15,000 per year, payable in advance. The payment for the 12 months ended October 31, 2012, was received as required and was credited to rent revenue.
- During December, received $6,500 of refundable deposits relating to containers used to transport equipment parts.
- During December, credit sales totaled $30,000. The state sales tax rate is 7%. (This is a summary journal entry for many individual sales transactions for the period.)
- On December 31st, 2011, Majan received part of the storage containers covered by refundable deposits which worth $3,200. The remaining are expected to be received after two years.
- Recorded the adjusting entry for accrued interest at the end of December 2011.
2012
- Mortgage note of $1,200,000 is due on March 1st, 2012. Interest at 9% has been paid up to December 31st. Majan intended on December 31, 2011, to refinance the note on its due date with new 8 years mortgage note to the same noteholders. On March 1st, Majan paid $300,000 in cash on the principle balance and refinanced the remaining.
Required: [ 11 Marks]
- Prepare the appropriate journal entries for the transactions above related to 2011.
Prepare the current and long-term liability sections of December 31, 2011, statement of financial position. (3 marks
Solutions
Expert Solution
| 2011 | Journal entries | ||
| 15-Sep | Inventory | 250000 | |
| Accounts payable | 250000 | ||
| 1-Oct | Cash | 12000000 | |
| 12%,9-mths. Note payable | 12000000 | ||
| 1-Nov | Cash | 15000 | |
| Rent revenue | 15000 | ||
| 31-Dec | Cash | 6500 | |
| Refundable deposits | 6500 | ||
| Accounts receivable | 32100 | ||
| Sales revenue | 30000 | ||
| Sales tax payable(30000*7%) | 2100 | ||
| Refundable deposits | 3200 | ||
| Cash | 3200 | ||
| Interest expense | 360000 | ||
| Interest payable | 360000 | ||
| (12000000*12%*3/12) | |||
| Rent revenue | 12500 | ||
| Unearned Rent revenue | 12500 | ||
| (15000/12*10 mths.) |
| Balance sheet (Partial) | ||
| As at Dec 31, 2011 | ||
| Current Liabilities | ||
| Accounts payable | 250000 | |
| 12%,9-mths. Note payable | 12000000 | |
| Interest payable on above | 360000 | |
| Sales tax payable | 2100 | |
| Unearned Rent revenue | 12500 | |
| Total current liabilities | 12624600 | |
| Long-term liabilities | ||
| Mortgage Note | 1200000 | |
| Refundable deposits(6500-3200) | 3300 | |
| Total Long-term liabilities | 1203300 |
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