Q32PGA_1
Question
Journalizing liability transactions and reporting them on the balance
sheet
The following transactions of Johnson Pharmacies occurred during 2018 and 2019:
2018
Mar. 1 Borrowed \(450,000 from Coconut Creek Bank. The 15-year, 5% note requires
payments due annually, on March 1. Each payment consists of \)30,000 principal
plus one year’s interest.
Dec. 1 Mortgaged the warehouse for \(250,000 cash with Saputo Bank. The mortgage
requires monthly payments of \)8,000. The interest rate on the note is 12% and
accrues monthly. The first payment is due on January 1, 2019.
31 Recorded interest accrued on the Saputo Bank note.
31 Recorded interest accrued on the Coconut Creek Bank note.
2019
Jan. 1 Paid Saputo Bank monthly mortgage payment.
Feb. 1 Paid Saputo Bank monthly mortgage payment.
Mar. 1 Paid Saputo Bank monthly mortgage payment.
1 Paid first installment on note due to Coconut Creek Bank.
Requirements
1. Journalize the transactions in the Johnson Pharmacies general journal. Round to
the nearest dollar. Explanations are not required.
2. Prepare the liabilities section of the balance sheet for Johnson Pharmacies on
March 1, 2019 after all the journal entries are recorded.
Step-by-Step Solution
VerifiedThe cash account is debited with $450,000and the 5% notes payable account is credited with $450,000.
The interest payable is the amount of the interest due at the end of the year.
Date | Particulars | Debit | Credit |
March 1, 2018 | Cash | $450,000 |
|
| 5% Notes Payable |
| $450,000 |
| (Being entry for the issue of notes) |
|
|
|
|
|
|
December 31, 2018 | Cash | $250,000 |
|
| 12% Notes Payable |
| $250,000 |
| (Being entry for the issue of bonds) |
|
|
|
|
|
|
December 31, 2018 | Interest Expense | $2,500 |
|
| Interest Payable |
| $2,500 |
| (Being entry for the accrued interest) |
|
|
|
|
|
|
December 31, 2018 | Interest Expense | $18,750 |
|
| Interest Payable |
| $18,750 |
| (Being entry for the accrued interest) |
|
|
|
|
|
|
January 1, 2019 | Mortgage Payable | $5,500 |
|
| Interest Payable | $2,500 |
|
| Cash |
| $8,000 |
| (Being entry for the monthly payment) |
|
|
|
|
|
|
February 1, 2019 | Mortgage Payable | $5,555 |
|
| Interest Payable | $2,445 |
|
| Cash |
| $8,000 |
| (Being entry for the monthly payment) |
|
|
|
|
|
|
March 1, 2019 | Mortgage Payable | $5,611 |
|
| Interest Payable | $2,389 |
|
| Cash |
| $8,000 |
| (Being entry for the monthly payment) |
|
|
|
|
|
|
March 1, 2019 | Interest Payable | $18,750 |
|
| Interest Expense | $3,750 |
|
| Notes Payable | $30,000 |
|
| Cash |
| $52,500 |
| (Being entry for the payment of the first instalment) |
|
|