Question

In: Accounting

The balance of Barkley Co’s supplies account was $800 at the start of the accounting period....

The balance of Barkley Co’s supplies account was $800 at the start of the accounting period. During the year Barkley made two purchases of supplies for $2,800 and $1,200. A physical count of the supplies on hand at the end of the accounting period showed that Barkley had $600 worth of supplies still on hand. For supplies, Barkley’s financial statements for this period should include

Supplies of $4,800 on the Balance Sheet

Supplies Expense of $4,200 on the Income Statement

Supplies of $4,200 on the Balance Sheet

Supplies Expense of $600 on the Income Statement

Nittany Company borrowed $75,000 from Lion Corporation on May 1, 2018 signing a 9-month payable with an interest rate of 4%.  Nittany Co operates on a calendar year basis and is preparing its year-end financial statements.  What amount of Interest Payable should Nittany Co. report from this note payable on its December 31, 2018 Balance Sheet?

$ 0

$1,750

$2,000

$3,000

Solutions

Expert Solution

Answer to Question 1:
Supplies account, Beginning Balance = $800
Supplies purchased = $2,800 + $1,200
Supplies purchased = $4,000

Supplies account, Ending Balance = $600

Supplies used = Beginning balance + Supplies used – Ending balance
Supplies used = $800 + $4,000 - $600
Supplies used = $4,200

The Barkley’s financial statement for this period would report:
Supplies expense of $4,200 on the Income Statement
Supplies of $600 on the Balance Sheet.

Option 2 is Correct.

Answer to Question 2:
Amount borrowed = $75,000
Date of Borrowing = May 1, 2018
Interest Rate = 4%
Interest accrued on December 31, 2018 = $75,000 * 4% * 8/12
Interest accrued on December 31, 2018 = $2,000

The Interest payable from the Note Payable for the Year ended December 31, 2018 balance sheet should record the interest expenses which has been accrued i.e. for the period of May 1, 2018 to December 31, 2018 which amount to $2,000.

Option 3 is Correct.



ekkarill92 answered 2 years ago
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