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Chp 13 Exercises and Problems Solutions

Chp 13 Exercises and Problems Solutions - EXERCISE...

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EXERCISE 13-2 (15–20 minutes) (a) Sept. 1 Purchases .............................................. 50,000 Accounts Payable ........................ 50,000 Oct. 1 Accounts Payable ................................. 50,000 Notes Payable .............................. 50,000 Oct. 1 Cash ........................................................ ................................................................ 50,000 Discount on Notes Payable .................. 4,000 Notes Payable .............................. 54,000 (b) Dec. 31 Interest Expense ................................... 1,000 Interest Payable ........................... 1,000 ($50,000 X 8% X 3/12) Dec. 31 Interest Expense ................................... 1,000 Discount on Notes Payable ........ 1,000 ($4,000 X 3/12)
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EXERCISE 13-2 (Continued) (c) (1) Note payable $50,000 Interest payable 1,000 $51,000 (2) Note payable $54,000 Less discount ($4,000 – $1,000) 3,000 $51,000 EXERCISE 13-4 (20–25 minutes) Kate Holmes Company Partial Balance Sheet December 31, 2007 Current liabilities: Notes payable (Note 1) $3,400,000* Long-term debt: Notes payable expected to be refinanced in 2008 (Note 1) 3,600,000 Note 1. Under a financing agreement with Gotham State Bank the Company may borrow up to 60% of the gross amount of its accounts receivable at an interest cost of 1% above the prime rate. The Company intends to issue notes maturing in 2012 to replace $3,600,000 of short-term, 15%, notes due periodically in 2008. Because the amount that can be borrowed may range from $3,600,000 to $4,800,000, only $3,600,000 of the $7,000,000 of currently maturing debt has been reclassified as long-term debt.
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