Ch 13 Solutions.doc - Solution to BE13-1 Interest expense...

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Solution to BE13-1 Interest expense on the trade notes payable during the current year is: $20,250 = $450,000 x 9% x 6 / 12 The journal entry to record the purchase of inventory and issuance of the trade notes payable is: Account February 1 Inventory 450,000 Notes Payable 450,000 The journal entry to record the payment of the trade notes payable and interest is: Account August 1 Notes Payable 450,000 Interest Expense 20,250 Cash 470,250 Solution to BE13-2 The entry required to record the cash collection for the four-year subscriptions is presented below. Account June 1, Current Year Cash 432,000 Unearned Subscription Revenue 432,000 Since the subscription on-line access is based on time, income is earned evenly over the life of the contract. Tedesco will recognize $9,000 in revenue each month ($432,000 / 48 months). At the end of the fiscal year, seven months of subscription revenue ($63,000) is earned since access to the online publication has been allowed for that period of time. The adjusting entry to record the income earned in the current period is presented below. Account December 31, Current Year Unearned Subscription Revenue 63,00 0 Subscription Revenue 63,000 At the end of the current year, the balance of unearned revenue is $369,000 ($432,000 - $63,000).
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Solution to BE13-4 On the date Coral sells the gift cards, it records the following journal entry: Account May 25 Cash 1,400 Unearned Revenue—Gift Cards 1,400 When the gift cards are redeemed on June 29, Coral makes the following journal entry. Account June 29 Unearned Revenue—Gift Cards 800 Sales Revenue—Gift Cards 800 Cost of Goods Sold 425 Inventory 425 Solution to BE13-5 Evergreen reports the $12,000 ($1,000 x 12) deposit as a liability when it delivers the dumpsters to the customers. Account Inventory Delivered to the Customer Cash 12,000 Deposit Liability 12,000 When the ten dumpsters are returned to Evergreen and the deposit is refunded to the customer, then Evergreen will make the following journal entry. Account Dumpsters Returned Deposit Liability 10,000 Cash 10,000 If the customer damages the dumpsters and does not return them to Evergreen, then Evergreen removes the liability and recognizes revenue and the cost of sales related to the dumpsters. The cost of each dumpster is $700 —so with two dumpsters not returned, the total cost of sales is $1,400 (2 x $700). Account Dumpsters Not Returned
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Deposit Liability 2,000 Dumpster Sales Revenue 2,000 Cost of Goods Sold 1,400 Dumpster Inventory 1,400 Solution to BE13-6 Account Current month sales Cash (or Accounts Receivable) 2,714,130 Sales Revenue 2,560,500 Sales Tax Payable ($2,560,500 x 6%) 153,630 Solution to BE13-8
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