Accounting

E13-2 |

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(Accounts and Notes Payable)

The following are selected 2010 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. |

(a) | Prepare journal entries for the selected transactions above. (For multiple debit/credit entries, list amounts from largest to smallest, e.g. 10, 8, 6.) |

  |

Date | Description/Account | Debit | Credit |

Sept. 1 | | |   |

  |           |   | |

Oct. 1 | cash | |   |

  |           notes payable |   | |

Oct. 1 | | |   |

  | | |   |

  |           |   | |

(b) | Prepare adjusting entries at December 31. |

1. the interest-bearing note.

2. the non-interest-bearing note.

  |

Date | Description/Account | Debit | Credit |

Dec. 31 | | |   |

  |           |   | |

Dec.31 | | |   |

  |           |   | |

(c) | Compute the total net liability to be reported on the December 31 balance sheet for: |

1. the interest-bearing note.

2. the non-interest-bearing note.

  |

Interest-bearing note | $ |

Zero-interest-bearing note | $ |

E14-10 |

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(Entries for Bond Transactions)

On January 1, 2010, Osborn Company sold 12% bonds having a maturity value of $800,000 for $860,651.79 which provides the bondholders with a 10% yield. The bonds are dated January 1, 2010, and mature January 1, 2015, with interest payable December 31 of each year. Osborn Company allocates interest and unamortized discount or premium on the effective interest basis.

(a) | Prepare the journal entry at the date of the bond issuance. (Round answers to 2 decimal places, e.g. 12,550.20.) |

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Description/Account | Debit | Credit |

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