. (TCO A) Adam\'s Adorable Creations Company Adam\'s Adorable Creations Company

Question

. (TCO A) Adam's Adorable Creations Company Adam's Adorable Creations Company provided the following financial information for its installment-sales for the current year. Financial Data: Installment sales for current year $2,500,000 Cost of goods sold on installment basis $2,000,000 Repossessed merchandise: Estimated value $32,000 Repossessed merchandise: Unpaid balances $45,000 Payments by customers $1,600,000 Required: a) Prepare journal entries for the end of the year based on the information above. b) Prepare the entry to record the gross profit realized in the current year. (Points : 40)

Explanation / Answer

hey refer this example it will help you: On September 1, 2010, Elmdale Corporation issued $620,300, 8%, 10-year bonds at face value. Interest is payable annually on September 1. Elmdale's year-end is December 31 (a) The issuance of the bonds. Date Account/Description Sept. 1 Cash $620,300 Bonds payable $620,300 (b) The accrual of interest on December 31, 2010. Dec. 31 Bond interest expense....................debit amount? Bond interest payable......................... credit amount? (c) The payment of interest on September 1, 2011. Sept. 1 debit? (Bonds Payable?? $620,300?) debit? (Premium on bonds payable?) credit?(cash??) Solution: a) The issuance of the bonds. Date Account/Description Sept. 1 Debit Cash $620,300 Credit Bonds payable $620,300 (b) The accrual of interest on December 31, 2010. Dec. 31 Debit Interest Expense $16,541.33 ($620,300 X 8% /12 X 4) - there are 4 months from 9/1-12/31 Credit Interest Payable $16,541.33 (c) The payment of interest on September 1, 2011. Sept. 1 Debit Interest Expense $33,082.67 ($620,300 X 8% /12 X 8) - there are 8 months from 01/01 - 8/31 Debit Interest Payable $16,541.33 Credit Cash $49,624.00 Source(s): 35 years of accounting experience

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