Accounting Wall Mantle and Grandfather Clocks Worksheet

Chapter 10 Homework Student Templates – 7th EditionM 10 – 1
A local theater company sells 1,500 season ticket packages at a price of $250 per package. The first
show in the 10-show season starts this week.
Required: Show the accounting equation effects and prepare the journal entries related to (a) the
sale of the season tickets before the first show(b) the revenue from fulfilling the performance
obligation by putting on the first show.
Assets
Cash + 375,000
(a)
(b)
Liabilities
Stockholders’ Equity
Deferred Revenue + 375,000
Deferred Revenue – 37,500 Service Revenue (+R) +37,500
(a) Journal Entry to record the sale of the season tickets before the first show:
Cash (1,500 x $250)
375,000
Deferred Revenue
375,000
(b) Journal Entry to record revenue from fulfilling the first show:
M 10 – 2
Grandpa Clocks, Inc. (GCI), is a retailer of wall, mantle, and grandfather clocks. Assume GCI sells a
grandfather clock for $10,000 cash plus 4 percent sales tax. The clock had originally cost GCI $6,000.
Required: Show the accounting equation effects & prepare the journal entries related to this
transaction. Assume GCI uses a perpetual inventory system.
Assets
Cash
+ 10,400
Inventories
– 6,000
Liabilities
Sales Tax Payable
+ 400
Stockholders’ Equity
Sales Revenue (+R)
+10,000
CGS (+E)
– 6,000
Cash
Sales Tax Payable
Sales Revenue
Cost of Goods Sold
6,000
Inventories
6,000
Chapter 10 Homework – ACCT 220 7th Edition
1
M 10 – 3
Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for
the November 1–14 pay period show that employees earned wages totaling $50,000 but that
employee income taxes totaling $7,000 and FICA taxes totaling $2,625 were withheld from this
amount. The net pay was directly deposited into the employees’ bank accounts.
Required: What was the amount of net pay? Assuming Lightning Electronics also must pay $250 of
unemployment taxes for this pay period, what amount would be reported as the total payroll costs?
Net Pay
$40,375
M 10 – 6
Greener Pastures Corporation borrowed $1,000,000 on November 1st. The note carried a 9 percent
interest rate with the principal and interest payable on June 1st of the following year (1 year note).
Required: Show the accounting equation effects and prepare the journal entries for (a) the note
issued on November 1 and (b) the interest accrual on December 31.
Assets
(a)
Cash
=
+ 1,000,000
Liabilities
+
Stockholders’ Equity
Notes Payable (short) + 1,000,000
(b)
Interest Payable
+ 15,000
Interest
Expense (+E)
-15,000
(a) Journal Entry on November 1st
(b) Adjusting Journal Entry December 31st
Chapter 10 Homework – ACCT 220 7th Edition
2
M 10 – 9
E-Tech Initiatives Limited plans to issue $500,000, 10-year, 4 percent bonds. Interest is payable
annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds
would be reported on the January 2, 2019, balance sheet if they are issued at 97.
Required: How will the bond be reported on the balance sheet if the bonds are issued at 97?
Long-term Liabilities
Bonds Payable
Discount on Bonds Payable
Carrying Value
$500,000
(15,000)
485,000
or (2) show only the net amount, as follows:
Long-term Liabilities
Bonds Payable, Net
$485,000
The discount is the excess of the face value over the issue price ($485,000 = 97% X $500,000 FV).
M 10 – 10
Use the information from M 10 – 9
Assume the bonds are issued at 102.
Required: How will the bond be reported on the balance sheet if the bonds are issued at 102?
or (2) show only the net amount, as follows:
E 10 – 7
Chapter 10 Homework – ACCT 220 7th Edition
3
On January 1, Applied Technologies Corporation (ATC) issued $500,000 in bonds that mature in 10
years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market
interest rate was 10 percent. The bonds pay interest once per year on December 31.
Required:
1. Determine the price at which the bonds were issued and the amount that ATC received at
issuance.
2. Prepare the journal entry to record the bond issuance.
3. Prepare the journal entry to record the first interest payment on December 31 assuming no
interest has been accrued earlier in the year.
Requirement 1
Because the stated interest rate was equal to the market interest rate, the bond would have been
issued at face value, meaning a quoted price of 100. The amount received at issuance would be
$500,000 x 100% = $500,000.
Requirement 2: Journal Entry to Record the Issuance of the Bond.
Requirement 3: Journal Entry to Record the payment of cash for Interest Expense
Chapter 10 Homework – ACCT 220 7th Edition
4
PA 10 – 2 (Use the data from PA 10-1 provided below)
Jack Hammer Company completed the following transactions. The annual accounting period ends
December 31.
Apr. 30
Received $600,000 from Commerce Bank after signing a 12-month, 6 percent, promissory note.
June 6
Purchased merchandise on account at a cost of $75,000. (Assume a perpetual inventory system.)
July 15
Paid for the June 6 purchase.
Aug. 31
Signed a contract to provide security service to a small apartment complex starting in
September, and collected six months’ fees in advance, amounting to $24,000.
Dec. 31
Determined salary and wages of $40,000 were earned but not yet paid as of December 31
Dec. 31
Adjusted the accounts at year-end, relating to interest.
Dec. 31
Adjusted the accounts at year-end, relating to security service.
Required:
1. Prepare journal entries for each of the transactions through August 31.
2. Prepare all adjusting entries required on December 31.
3. Show how the liabilities are reported on the balance sheet at December 31.
4. Omit this requirement.
Requirement 1
April 30:
Cash
600,000
Notes Payable (short-term
600,000
June 6:
July 15:
August 31:
Chapter 10 Homework – ACCT 220 7th Edition
5
PA 10 – 2 Continued
Requirement 2
December 31:
December 31:
Interest Expense ($600,000 x 6% x 8/12)
24,000
Interest Payable
24,000
December 31:
Requirement 3
Balance Sheet:
Current Liabilities
Salaries & Wages Payable
$40,000
Interest Payable
$24,000
Deferred Revenue (Unearned Revenue)
$8,000
Notes Payable
$600,000
Total Current Liabilities
$672,000
Chapter 10 Homework – ACCT 220 7th Edition
6
Question 1 (1 point)
Listen
M 10-2
The journal entry to record the sale includes a credit of $400 to
Sales Tax Payable.
Question 1 options:
a) True
b) False
Question 2 (1 point)
Listen
PA 10-2 – Requirement 2
On December 31st, interest expense recognized on the note
payable is $48,000.
Question 2 options:
a) True
b) False
Question 3 (1 point)
Listen
PA 10-2 – Requirement 1
On June 6, the journal entry to record the purchase of
inventory includes a debit to Accounts Payable and a credit to
Inventory.
Question 3 options:
a) True
b) False
Question 4 (1 point)
Listen
M 10-6 Part (b) Adjusting Journal Entry on December 31st
The journal entry on Dec 31st, includes a debit to Interest
Expense of $15,000 and a credit to Interest Payable of
$15,000.
Question 4 options:
a) True
b) False
Question 5 (1 point)
Listen
M 10 – 9
Since the bond is issued at 97, the bond would be issued at a
discount.
Question 5 options:
a) True
b) False
Question 6 (1 point)
Listen
M 10-1 – Part b Journal Entry to Record Revenue Earned from
1st Show
The journal entry to record revenue earned after the 1st show
includes a debit to Deferred Revenue (Unearned Revenue) and
a credit to Service Revenue.
Question 6 options:
a) True
b) False
Question 7 (1 point)
Listen
Exercise 10 – 7 Requirement 2 Journal Entry to Record the
Issuance of the Bond.
The journal entry to record the sale of the bond includes a debit
to Cash of $500,000 and a credit to Bond Payable of $500,000.
Question 7 options:
a) True
b) False
Question 8 (1 point)
Listen
M 10 – 6 Part (a) Journal Entry on November 1st to Record the
Note
The journal entry on Nov. 1st, to record the note, includes a
debit to Note Payable and a Credit to Interest Payable.
Question 8 options:
a) True
b) False
Question 9 (1 point)
Listen
Exercise 10-7
Bond Payable is a liability account reported on the Balance
Sheet.
Question 9 options:
a) True
b) False
Question 10 (1 point)
Listen
M 10 – 3
Net Pay is $40,375.
Question 10 options:
a) True
b) False