HW4 - P8-2BEskimo Joe'sEskimo Joe's, designer of the...

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Unformatted text preview: P8-2BEskimo Joe'sEskimo Joe's, designer of the world's second best-selling T-shirt (just behind Hard Rock Cafe), borrows $20 million cash on November 1, 2012. Eskimo Joe's signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.1. Prepare the journal entries on November 1, 2012, to record the notes payable forEskimo Joe's. Solution November 1, 2012Cash 20,000,000 Notes Payable 20,000,000 (Issuance of notes payable) 2. Record the adjustment on December 31, 2012, for Eskimo Joe's. Solution December 31, 2012Interest Expense ($20 million x 9% x 2/12) 300,000 Interest Payable 300,000 (To record interest expense incurred, but not paid) 3. Prepare the journal entries on April 30, 2013, to record payment of the notes payable for Eskimo Joe's. Solution April 30, 2013 Notes Payable 20,000,000 Interest Expense ($20 million x 9% x 4/12) 600,000 Interest Payable ($20 million x 9% x 2/12) 300,000 Cash 20,900,000 (Payment of notes payable and interest) P8-7BCompact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2012. Record any amounts as a result of each of the following contingencies. 1. Sales were $28 million (all credit) for 2012. Although no customer accounts have been shown to be uncollectible, the company estimates that 2% of credit sales will eventually prove uncollectible....
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HW4 - P8-2BEskimo Joe'sEskimo Joe's, designer of the...

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