1.

Journal entries for 2016

1. Legal fees $45,000

Cash $45,000
(To record payment of litigation fee)
2. Accounts Receivables $ 940,560
Sales $ 940,560
(To records sales on credit)

3. Premium Liability

Cash $55,000

Premium liability $55,000

4. For January 1st 2016

Accrued expense $3,000
Cash $3,000
(To record interest payment on accrued interest for December 2015)

For June 30th 2016

Interest expense $3,000

Cash $3,000

(To record interest payment on June 2016)

5. On September 1st 2016

6% bond payable $101,000

5% bonds payable $100,000

Discount on 6% bond payable $1,000

(to record the redeeming 6% bond by the use of 5% bonds)

On December 31st

Interest expense $1,667

 Accrued interest expense $1,667

(To record 4 months interest accrued on the 5% bond)

Interest expense $1,000

Accrued interest expense $1,000

(To record accrued interest on the 6% bonds for two months)

6. Depreciation on PP $ E

Depreciation Expenses $30,000

Accumulated depreciation $30,000

(To record depreciation expense for 2016 on PP$E)

7. Cash $906,450

Accounts Receivable $906,450

(To record of the cash received from customers)

8. Accounts payable $728,254

Cash $728,254
(To record cash paid to suppliers)

9. Purchases $689,525
Accounts payable $689,525
(To record purchase of inventory on credit)
 10. Land $30,000

Cash $30,000

(To record the purchase of land for construction)

Workings

3. = (6000 x 60% = 3600 coupon

= 3600 - 3400 = 200 / 4 = 50 x 1.1
= 55 * 1000 = 55,000
4. 6% /2 = 3%

3% * $100,000 = $3,000

5. Redeeming the 6% bond at 101

= 1.01 * 100,000 = 101,000
2 months interest on 6 % bonds
= (3000/6) * 2 = $1,000
4 months interest on 5% bond
= ($2,500/6)*4 = $1,667

6. Deprecation on PP&E

= Depreciation expense = $750,000/25 =$30,000

 Cash balance = $11,980 + (55,000 -45,000 -3,000 -3000 + 906,450 - 728,254 – 30,000)

= $164,176

 Account receivable balance = 20,520 + (940,560 - 906,450) = $54,630

 Accounts payable balance = 50,772 + ($689,525 - 728,254 ) = $12,043