P13-1 (L01) Groupwork (Current Liability Entries and
Adjustments) Described below are certain transactions of Edwardson Corporation.
The company uses the periodic inventory system.
1.
On February 2, the corporation purchased goods
from Martin Company for $70,000 subject to cash discount terms of 2/10, n/30.
Purchases and accounts payable are recorded by the corporation at net amounts
after cash discounts. The invoice was paid on February 26.
2.
On April 1, the corporation bought a truck for
$50,000 from General Motors Company, paying $4,000 in cash and signing a
1-year, 12% note for the balance of the purchase price.
3.
On May 1, the corporation borrowed $83,000 from
Chicago National Bank by signing a $92,000 zero-interest-bearing note due 1
year from May 1.
4.
On August 1, the board of directors declared a
$300,000 cash dividend that was payable on September 10 to stockholders of
record on August 31.
Instructions
(a)
Make all the journal entries necessary to record
the transactions above using appropriate dates.
(b)
Edwardson Corporation’s year-end is December 31.
Assuming that no adjusting entries relative to the transactions above have been
recorded, prepare any adjusting journal entries concerning interest that are
necessary to present fair financial statements at December 31. Assume
straight-line amortization of discounts.
