Prepare journal entries to record the following transactions:
Oct 1 Made credit sales of $50,000 and added a 6% sales tax
Oct 15 Collected $20,000 cash in advance after signing a contract promising to provide 400 hours of service over the next several months.
Nov 1 Collected cash for all the credit sales (including taxes) made on Oct. 1
Nov. 15 Remitted the sales taxes (collected on Nov. 1) to the state government
Dec 1 Borrowed $90,000 by signing a $90,000, 8% 270-day Note.
Dec 10 Estimated warranty expense on Assurance-Type Warranties is estimated to be $7,000 for the year, of which $2,000 of Inventory was given out today to cover warranty claims. (No warranty entries were made before now)
Dec 30 Made an adjusting entry to reflect the fact that 80 hours of service have been provided under the terms of the Oct. 15 contract.
Dec 31 Made an adjusting entry to accrue interest on the Dec. 1 Note (Use 360 days in a year for your calculations)
Jan 1 Sold $200,000 of 6% bonds for $176,695. Interest is payable semi-annually.
Feb 1 Issued 800 shares of $10 par value Common Stock and 200 shares of $25 Par Value Preferred Stock for a lump sum of $35,000. Market prices at this time are $30 per share for Common and $80 per share for Preferred.
Mar 1 Redeemed $40,000 of bonds at 95. The unamortized Premium is $3,000 and unmortized bond issue costs are $6,000.
May 1 Issued 400 shares of $10 par value Common Stock for a $6,000 Machine
June 1 Declared a property dividend to be distributed Aug. 1 which will transfer Equity Investments that cost $50,000 and have a fair value of $80,000.
July 1 Made the interest payment on the Jan. 1 bonds and recorded interest expense and discount amortization using the Effective Interest method The effective annual interest rate is 8%.
Aug 1 Distributed the property dividend (Equity Investments) described on June 1
Aug 15 Declared a $14,000 cash dividend of which $5,000 is a return of capital. (No distinction needed between Common and Preferred)
Aug 28 Paid off the Dec. 1, 2017 note. (No interest accruals have been made since Dec. 31)
Sept 15 Paid the cash dividend declared on August 15th
Sept 30 Issued $40,000 par value bonds for $41,000, with detachable stock warrants The bonds separately have a total fair value of $37,800. The warrants separately have a total fair value of $4,200. (The Proportional Method is used)
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