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P10-1B

On January 1, 2012, the ledger of Fleming Company contained the following liability accounts.

Accounts Payable $52,000 Sales Taxes Payable 8,200 Unearned Service Revenue 11,000

During January, the following selected transactions occurred.

Jan. 1 Borrowed $18,000 from TriCounty Bank on a 3-month, 7%, $18,000 note.

5 Sold merchandise for cash totaling $18,480, which includes 5% sales taxes.

12 Provided services for customers who had made advance payments of $8,000. (Credit Service Revenue.)

14 Paid state revenue department for sales taxes collected in December 2011 ($8,200).

20 Sold 500 units of a new product on credit at $50 per unit, plus 5% sales tax.

During January, the companys employees earned wages of $54,000. Withholdings related to these wages were $4,131 for Social Security (FICA), $3,900 for federal income tax, and $1,200 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31.

Instructions

1. Journalize the January transactions.
2. Journalize the adjusting entries at January 31 for the outstanding notes payable and for wages expense and payroll tax expense.
3. Prepare the current liabilities section of the balance sheet at January 31, 2012. Assume no change in accounts payable.

P10-2B

Majestic Mountain Bikes markets mountain-bike tours to clients vacationing in various locations in the mountains of Colorado. In preparation for the upcoming summer biking season, Majestic entered into the following transactions related to notes payable.

Mar. 1 Purchased Puma bikes for use as rentals by issuing a $9,000, 3-month, 6% note payable that is due June 1.

Mar. 31 Recorded accrued interest for the Puma note.

Apr. 1 Issued a $45,000 9-month note for the purchase of mountain property on which to build bike trails. The note bears 8% interest and is due January 1.

Apr. 30 Recorded accrued interest for the Puma note and the land note.

May 1 Issued a 4-month note to Jackson State Bank for $12,000 at 6%. The funds will be used for working capital for the beginning of the season; the note is due September 1.

May 31 Recorded accrued interest for all three notes.

June 1 Paid principal and interest on the Puma note.

June 30 Recorded accrued interest for the land note and the Jackson State Bank note.

Instructions

1. Prepare journal entries for the transactions noted above.
2. Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Use T accounts.)
3. Assuming that Majestics year-end is June 30, show the balance sheet presentation of notes payable and interest payable at that date.
4. How much interest expense relating to notes payable did Majestic incur during the year?

P10-3B

The following section is taken from Lois Corp.s balance sheet at December 31, 2011.

Current liabilities Interest payable $ 84,000

Long-term liabilities Bonds payable (7%, due January 1, 2016) 1,200,000

Interest is payable annually on January 1. The bonds are callable on any annual interest date.

Instructions

1. Journalize the payment of the bond interest on January 1, 2012.
2. Assume that on January 1, 2012, after paying interest, Lois Corp. calls bonds having a face value of $300,000. The call price is 104. Record the redemption of the bonds.
3. Prepare the adjusting entry on December 31, 2012, to accrue the interest on the remaining bonds.

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