The following are selected 2012 transactions of Darby Corporation Sept. 1 Purcha

Question

The following are selected 2012 transactions of Darby Corporation

Sept. 1 Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $50,000, 12-month, 8% note to Orion in payment of account. Oct. 1 Borrowed $75,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $81,000 note.

(a) Prepare journal entries for the selected transactions above

(b) Prepare adjusting entries at December 31

(c) Compute the total net liability to be reported on the December 31 balance sheet for

Explanation / Answer

(All amounts in $) (a) Journal Entries in the books of Darby Corporation Date Particulars Debit $ Credit $ 01-Sep Inventory A/c DR 500000 To Orion Co A/c 500000 01-Oct Orion Co A/c 500000 To 8% Note Payable A/c 500000 01-Oct Cash/Bank A/c DR 75000 Premium on Borrowings A/c DR 6000 To Note Payable to Bank A/c 81000 (b) Adjusting Entries for December 31 Closing Interest on Note A/c DR 10000 To Interest on Note Payable A/c 10000 (c) The total net liability reported in the Balance Sheet of Darby Corporation as on December 31 8% Note Payable 500000 Note Payable to Bank 81000 Interest on 8% Note Payable 10000 591000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.