Hunter McIntosh

ACC 202

Current Liabilities pt 2

1. On November 1, Clear Glass Company borrowed $20,000 from First American Bank by issuing a
90-day interest-bearing note at 12%. Show the journal entries at date of issuance, adjusting
entry at December 31, and date of maturity.

General Journal
Date Account Titles Debit Credit
Nov. 1 Cash $ 20,000
Notes Payable $ 20,000
Dec. 31 Interest Expense $ 395
Interest Payable $ 395
Feb. 1 Notes Payable $ 20,000
Interest Payable $ 395
Interest Expense $
Cash

2. See #1. Do the same for a non-interest bearing note discounted at 12%.

General Journal
Date Account Titles Debit Credit
Nov. 1 Cash $ 19,400
Discount on Notes Payable $ 600
Notes Payable $ 20,000
Dec. 31 Interest Expense $ 300
Discount on Notes Payable $ 300
Feb. 1 Notes Payable $ 20,000
Cash $ 20,000
Feb. 1 Interest Expense $ 300
Discount on Notes Payable $ 300

3. On December 5, Super Circuit Store sold gift certificates totaling $12,000. By December 31, all
but $2,125 worth of these certificates had been redeemed for merchandise. Outstanding
certificates were then redeemed by January 15. Prepare journal entries on Super Circuit’s books
to reflect the preceding transactions. How would the gift certificates be reported on Super
Circuit’s balance sheet on December 31?

General Journal
Date Account Titles Debit Credit
Dec. 5 Cash $ 12,00
Unearned Revenue $ 12,000
Dec. 31 Unearned Revenue $ 9,875
Sales Revenue $ 9,875
Hunter McIntosh

Jan. 15 Unearned Revenue $ 2,125

Sales Revenue $ 2,125

Super Circuit Store

Partial Balance Sheet
December 31, 20--
Current Liabilities
Unearned Revenue: Gift Certificates $ 2,125

4. On September 1, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On
October 1, 900 are sold at $125 each with a 1-year warranty. Carolina estimates that the
warranty cost on each Blu-ray player sold will probably average $10 per unit. During the final 3
months of the year, Carolina incurred warranty costs of $4,000 and in the next year warranty
costs were $5,000. Prepare the journal entries for the preceding transactions. Show how the
preceding items would be reported on the December 31 balance sheet.

General Journal
Date Account Titles Debit Credit
Oct. 1 Cash $ 112,500
Sales $ 112,500
Dec. 31 Warranty Expense $9,000
Estimated Warranty Liability $ 9,000
Dec. 31 Estimated Warranty Liability $ 4,000
Cash $ 4,000
Dec. 31 Estimated Warranty Liability $ 5,000
Cash $ 5,000

Carolina Electronics Company

Partial Balance Sheet
December 31, 20--
Current Assets
Cash on Hand $ 108,500
Current Liabilities
Estimated Warranty Liability $ 5,000
Hunter McIntosh

5. On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The
premium, a toy tiger, may be claimed by sending in $1 plus 10 coupons; one coupon is included
in each box of cereal sold. Tiger estimates, based on past experience, that 60% of the coupons
will be redeemed. During the year, Tiger purchased 240,000 toy tigers at $1.25 each for the
premium promotion and sold 5,000,000 boxes of cereal at $1.80 per box. Also, 2,200,000
coupons were redeemed. Prepare the journal entries related to the previous promotion
(including sales) for the year. Show how the items related to the premium plan would be
reported on the December 31 balance sheet.

General Journal
Date Account Titles Debit Credit
Dec. 31 Premium Inventory $ 300,000
Cash $ 300,000
Dec. 31 Cash $ 9,000,000
Sales Revenue $ 9,000,000
Dec. 31 Premium Expense $ 75,000
Premium Liability $ 75,000
Dec. 31 Cash $ 220,000
Premium Liability $ 55,000
Premium Inventory $ 275,000

Tiger Cereal Company

Partial Balance Sheet
December 31, 20--
Current Assets
Premium Inventory $ 25,000
Current Liabilities
Premium Liability $ 20,000