Student Name: Instructor Class: McGraw-Hill/Irwin Problem 13-01 BLANTON PLASTICS General Journal Account Blanton Plastics Cash

Notes payable L & T Bank Notes receivable Cash Debit 14,000,000 14,000,000 14,000,000 14,000,000 Adjusting Entries (December 31, 2011) Blanton Plastics Interest expense Interest payable L & T Bank Interest receivable Interest revenue 420,000 420,000 420,000 420,000 Maturity (January 31, 2012) Blanton Plastics Interest expense Interest payable Notes payable Cash L & T Bank Cash Interest revenue Interest receivable Notes receivable 140,000 420,000 14,000,000 14,560,000 14,560,000 140,000 420,000 14,000,000
- Correct! - Correct! - Correct! - Correct! - Correct! - Correct!

Credit

Issuance of Note (October 1, 2011) Cash 13,440,000 Discount on notes payable 560,000 Notes payable Adjusting Entry (December 31, 2011) 420,000

14,000,000

- Correct!

Interest expense Interest payable

420,000

- Correct!

Maturity (January 31, 2012) Interest expense 140,000 Discount on notes payable Notes payable Cash Effective interest rate: Discount Cash proceeds Interest rate for 4 months Annual effective rate 14,000,000

140,000

- Correct!

14,000,000

- Correct!

$ 560,000 $ 13,440,000 4.1667% 12.5%

- Correct!

Given Data P13-01: BLANTON PLASTICS Cash borrowed, 10/1/2011 Term of promissory note Promissory note interest $ 14,000,000 4 months 12%

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 13-02 CAMDEN BIOTECHNOLOGY General Journal Date (a) Account 2011 No entry Debit Credit

(b)

Cash Notes payable Cash Liability - refundable deposits Accounts receivable Sales revenue Sales taxes payable Interest expense Interest payable 2012 Cash Bonds payable Interest expense Interest payable Notes payable Cash

12,000,000 12,000,000 2,600 2,600 4,346,000 4,100,000 246,000 300,000 300,000

- Correct! - Correct! - Correct! - Correct!

(c)

(d)

(e)

(f)

10,000,000 10,000,000 200,000 300,000 12,000,000 12,500,000 1,300 1,300

- Correct! - Correct! - Correct!

(g)

Liability - refundable deposits Cash

CAMDEN BIOTECHNOLOGY Partial Balance Sheet December 31, 2011 Current Liabilities: Accounts payable Current portion of bank loan Liability - refundable deposits Sales taxes payable Accrued interest payable Total current liabilities Long-Term Liabilities: Bank loan to be refinanced on a long-term basis

252,000 2,000,000 2,600 246,000 300,000 $ 2,800,600

- Correct!

$ 10,000,000

- Correct!

Given Data P13-02: CAMDEN BIOTECHNOLOGY 2011 Short-term line of credit Short-term line of credit interest rate Cash borrowed Cash borrowed interest rate Deposits received September - December sales on account State sales tax Local sales tax 2012 Issued 10-yr. bonds at face value Trade accounts payable, 12/31/2011

$ 15,000,000 10.5% $ 12,000,000 10% $ 2,600 $ 4,100,000 3% 3% $ 10,000,000 $ 252,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 13-04 Requirement 1: MANUFACTURING EQUITABLE General Journal Date Account (a) Interest expense Interest payable (b) No adjusting entry since interest has been paid up to December 31. $950,000 can be reported as a noncurrent liability, because (a) intent and (b) ability to refinance has been demonstrated for that amount. Debit 25,000 Credit 25,000
- Correct!

(c)

Accounts receivable (to eliminate the credit balance) Advances from customers Rent revenue Unearned rent revenue

18,000 18,000 25,000 25,000

- Correct! - Correct!

(d)

Requirement 2: MANUFACTURING EQUITABLE Partial Balance Sheet December 31, 2011 Current Liabilities Accounts payable Current portion of long-term debt Accrued interest payable Advances from customers Unearned rent revenue Bank notes payable Total current liabilities Long-Term Liabilities Mortgage note payable

35,000 250,000 25,000 18,000 25,000 600,000 953,000

- Correct!

950,000

- Correct!

Given Data P13-04: MANUFACTURING EQUITABLE Account balances: Accounts receivable Accounts payable Bank notes payable Mortgage note payable Additional information: Bank notes interest rate Mortgage note interest rate Cash toward principal Amount refinanced A/R subsidiary accounts credit balances Tenant rent per year

$ 92,500 $ 35,000 $ 600,000 $ 1,200,000

$ $ $ $

10% 9% 250,000 950,000 18,000 30,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 13-08 Requirement 1: Contingent liability calculation Loss Amount $40,000,000 $30,000,000 $20,000,000 Probability 20% 50% 30% Contingency $ 8,000,000 15,000,000 6,000,000 $ 29,000,000 0.95238 * $ 27,619,020
Correct!

* Present value of $1, n = 1, i = 5$ (from Table 6A-2) HEINRICH TIRE COMPANY General Journal Date Account Requirement 2: Loss - product recall Liability - product recall Requirement 3: Interest expense Liability - product recall Requirement 4: Liability - product recall Loss - product recall Cash Requirement 5: Loss - product recall Liability - product recall Debit 27,619,020 27,619,020
- Correct!

Credit

1,380,980 1,380,980
- Correct!

29,000,000 1,000,000 30,000,000

- Correct!

30,000,000 30,000,000
- Correct!

Given Data P13-08: HEINRICH TIRE COMPANY Tire recall potential loss probability: Loss Amount $ 40,000,000 $ 30,000,000 $ 20,000,000 Required settlement date Risk free interest rate Probability 20% 50% 30% 12/31/2012 5%