Exercise 10-9 (Part Level Submission) On July 31, 2014, Amsterdam Company engage
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Question
Exercise 10-9 (Part Level Submission)
On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2014. To help finance construction, on July 31 Amsterdam issued a $622,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $519,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $103,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2014, is a $32,600, 8%, 6-year note payable, dated January 1, 2011, on which interest is payable each December 31.
(a)
(b)
Date
Account Titles and Explanation
Debit
Credit
7/31
(To record the note.)
(To record the payment to Minsk.)
11/1
(To record the proceeds from the investment.)
(To record the payment to Minsk.)
Part a I have done and correct already. I just cant figure out numbers and account titles for journal entries. Please expain how numbers are found so i can understand for the future. Thank you
allowed account titles below:
Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Trucks
Buildings
Cash
Common Stock
Contribution Expense
Contribution Revenue
Cost of Goods Sold
Depreciation Expense
Direct Labor
Discount on Notes Payable
Equipment
Factory Overhead
Gain on Disposal of Buildings
Gain on Disposal of Equipment
Gain on Disposal of Machinery
Gain on Disposal of Trucks
Gain on Disposal of Plant Assets
Insurance Expense
Interest Expense
Interest Payable
Interest Revenue
Inventory
Land
Land Improvements
Loss on Disposal of Buildings
Loss on Disposal of Equipment
Loss on Disposal of Machinery
Loss on Disposal of Trucks
Machinery
Maintenance and Repairs Expense
Materials
No Entry
Notes Payable
Organization Expense
Paid-in Capital in Excess of Par - Common Stock
Prepaid Insurance
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Trading Securities
Trucks
Exercise 10-9 (Part Level Submission)
On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2014. To help finance construction, on July 31 Amsterdam issued a $622,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $519,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $103,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2014, is a $32,600, 8%, 6-year note payable, dated January 1, 2011, on which interest is payable each December 31.
Explanation / Answer
July 31 , 2014
Interest expense account debit $ 74,736
To interest payable $ 74,736
( For interest payable at 12% rate)
July 31, 2014
Minsk tooling company account debit $ 519,800
To cash $519,800
( For cash paid to minsk tooling company)
Nov 1, 2014
Cash account debit ( 103,000 + 103,000 * 10% * 3/12) 105,575
To investment 103,000
To interest income 5,575
( For proceeds from investment)
Minsk tooling company account debit $ 103,000
To cash $103,000
( For cash paid to minsk tooling company)
December 31,2014
Interest expense ( 32,600 * 8%) 2,608
To interest payable 2,608
( For interest payable on notes)
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