The following transactions of Smith Pharmacies occurred during 2016 and 2017: 20
ID: 2493035 • Letter: T
Question
The following transactions of Smith Pharmacies occurred during 2016 and 2017:
2016
March 1 Borrowed $240,000 From Naples Bank. The eight-year, 7% notes requires payment due annually, on March 1. Each payment consists of $30,000 principal plus one year’s interest.
Dec. 1mortgaged the warehouse for $150,000 cash with Sawyer Bank. The mortgage requires monthly payments of $6,000. The interest rate on the note is 11% and accrues monthly. The first payment is due on January 1, 2017.
Dec. 31 Recorded interest accrued on the Sawyer Bank note.
Dec. 31 Recorded interest accrued on the Naples Bank note.
2017
Jan 1 Paid Sawyer Bank monthly mortgage payment
Feb 1 Paid Sawyer Bank monthly mortgage payment.
Mar 1 Paid Sawyer Bank monthly mortgage payment
Mar 1 Paid first installment on note due to Naples Bank.
Requirements
Journalize the transactions in the Smith Pharmacies general journal. Round all answers to the nearest dollar. Explanations are not required. Use the below format for each entry.
Date
Accounts and Explanation
Debit
Credit
Prepare the liabilities section of the balance sheet for Smith Pharmacies on March 1, 2017 after all the journal entries are recorded.
Beginning
Principal
Interest
Total
Ending
Balance
Payment
Expense
Payment
Balance
12/01/2016
1/01/2017
2/01/2017
3/01/2017
4/01/2017
5/01/2017
6/01/2017
7/01/2017
8/01/2017
9/01/2017
10/01/2017
11/01/2017
12/01/2017
1/01/2018
2/01/2018
3/01/2018
Now prepare the liabilities section of the balance sheet for Smith Pharmacies on March 1, 2017
Date
Accounts and Explanation
Debit
Credit
Explanation / Answer
Interest for each month has been calculated at amount outstanding at beginning of each month at 11 % for 1/12 year
Example for 01/01/2017 interest is calculated as
150000 x 11% x 1/12
= 1375 and so on for other months
Total Payment has been specfied at 6000 including interest expense and principal amount
Firstly we will calculate interest expesne and then deduction it from total amount we can find principal amount remaid in each installment
Payment schedule of Sawyer Bank Date Beginning Principal Interest Total Ending Balance Payment Expense Payment Balance 12/1/2016 150000 0 0 0 150000 1/1/2017 150000 4625 1375 6000 145375 2/1/2017 145375 4667 1333 6000 140708 3/1/2017 140708 4710 1290 6000 135998 4/1/2017 135998 4753 1247 6000 131245 5/1/2017 131245 4797 1203 6000 126448 6/1/2017 126448 4841 1159 6000 121607 7/1/2017 121607 4885 1115 6000 116722 8/1/2017 116722 4930 1070 6000 111792 9/1/2017 111792 4975 1025 6000 106817 10/1/2017 106817 5021 979 6000 101796 11/1/2017 101796 5067 933 6000 96729 12/1/2017 96729 5113 887 6000 91616 1/1/2018 91616 5160 840 6000 86456 2/1/2018 86456 5207 793 6000 81249 3/1/2018 81249 5255 745 6000 75994Related Questions
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