Candlelight Corporation, whose fiscal year ended June 30, 2014, completed the fo

Question

Candlelight Corporation, whose fiscal year ended June 30, 2014, completed the following transactions involving notes payable: Obtained a 60-day extension on an $36,000 trade account payable owed to a supplier by signing a 60-day $36,000 note. Interest is in addition to the lace value, at the rate of 14 percent. Made the end-of-year adjusting entry to accrue interest expense. (Round to the nearest cent.) Paid off the note plus interest due the supplier. (Round to the nearest cent.) REQUIRED Prepare journal entries for the notes payable transactions. ACCOUNTING CONNECTION When notes payable appears on the balance sheet, what other current liability would you look for to be associated with the notes? What would it mean if this other current liability did not appear? The payroll register for Candlelight Corporation contained the following totals at the end of July: wages, $278,250; federal income taxes withheld, $71,163; state income taxes withheld, $11,727; Social Security tax withheld, $17,253; Medicare tax withheld, $4,035; medical insurance deductions, $9,600; and wages subject to unemployment taxes, $171,720. REQUIRED Prepare journal entries to record the (1) monthly payroll and (2) employer payroll expenses, assuming Social Security and Medicare taxes equal to the amount for employees, a federal unemployment insurance tax of 0.8 percent, a state unemployment tax of 5.4 percent, and medical insurance premiums for which the employer pays 80 percent of the cost.

Explanation / Answer

Part A:

1.

may 21 cash Dr.$36000

To Notes payable $36000

30 May interest Expense Dr.$140

To interest payable 140

Note:-  interest for 1 months = 36000 * 14% * 1 months /12 months

   = $420

interesy for May for 10 days = 420* 10days /30 days

= 140

30 june interest expense Dr.$420

To interest payable $420

20 july interest expense($420 * 20days /30days) Dr$280

To interest payable 280

Notes payable Dr.$36000

Interest payable Dr.$840

To cash $36840

2. other current liabillity associated with the Notes Payable is "Unpaid amount of interest on Notes payable".

If this liability does not appear in the Balance sheet , that means this liability has been paid off in the current period.

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