Reference no: EM132880773
Question -
1 - CURRENT LIABILITIES ACCOUNTING TREATMENT
The following are selected 2019 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. Instructions:
a. Prepare journal entries for the selected transactions above.
b. Make adjusting entries at December 31.
c. Compute the total net liability to be reported on the December 31 statement of financial position for:
1. The interest-bearing note; and 2. The zero-interest-bearing note.
2 - ZERO INTEREST BEARING NOTE
On December 31, 2019, Hurly Co. performed environmental consulting services for Cascade Co. Cascade was short of cash, and Hurly Co. agreed to accept a $300,000 zerointerest-bearing note due December 31, 2021, as payment in full. Cascade is somewhat of a credit risk and typically borrows funds at a rate of 10%. Hurly is much more creditworthy and has various lines of credit at 6%.
a. Prepare the journal entry to record the transaction of December 31, 2019, for Hurly Co.
b. Assuming Hurly Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2020.
c. Assuming Hurly Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2021.