Problem 1: There Are 3 Problems This Week. Click On The Tabs

Problem 1there Are 3 Problems This Week Click On The Tabs At The Bot

Problem 1there Are 3 Problems This Week Click On The Tabs At The Bot

Problem 1 There are 3 problems this week. Click on the tabs at the bottom of the spreadsheet to view each problem. Prepare the journal entries for the eight following transactions. Use dates but descriptions are not required.

On 10/1/15, Equipment was purchased for $10,000 cash down payment and a 10% per annum promissory note of $40,000.

On 12/31/15, the fiscal year ended and the accrued interest was recorded as an adjusting entry.

On June 30, 2016 the note was paid in full. No interest has been accrued in 2016 yet.

There are 10,000 shares of $2 par common stock outstanding. The board of directors declares a 15 cent dividend per share on May 15, 2016.

On June 30, the above declared dividend is paid to holders of record as of June 20, 2016.

There are 8,000 shares of $10 par common stock outstanding. On July 15, 2016 the market value of the stock is $72 per share and the board of directors declares a 10% stock dividend.

On July 30, 2016 the above shown stock dividend is paid to holders of record as of July 20.

On August 10, 2016 the board of directors declares a 2-for-1 stock split of 50,000 outstanding shares of $15 par value common stock.

Paper For Above instruction

The task involves preparing journal entries for several complex transactions occurring over the fiscal year 2015-2016. The transactions include initial equipment purchase financed partly by cash and a promissory note, accrued interest recognition at year-end, full repayment of the note, dividends declaration and payment, stock dividends, and stock splits.

First, the equipment purchase on October 1, 2015, requires recording the equipment asset along with the corresponding cash payment and a liability for the promissory note. The journal entry would debit Equipment for $50,000 (cash paid plus financed amount) and credit Cash for $10,000 and Notes Payable for $40,000.

Next, the accrued interest as of December 31, 2015, must be recognized. The interest accrued from October 1, 2015, to December 31, 2015, on the $40,000 note at 10% per annum amounts to $1,000 ($40,000 x 10% x 3/12). The entry involves debiting Interest Expense for $1,000 and crediting Interest Payable for the same amount.

On June 30, 2016, the note and accrued interest are paid. The total repayment includes the principal and the interest accrued until June 30, 2016. The accrued interest for 6 months (January 1–June 30) is $2,000 ($40,000 x 10% x 6/12), totaling $3,000 when combined with the earlier accrued interest. The entry debits Notes Payable for $40,000, Interest Payable for $2,000, and Interest Expense for $1,000; credits Cash for $43,000.

Regarding dividends, 10,000 shares of $2 par stock declared a dividend of $0.15 per share on May 15, 2016. The total dividend payable is $1,500 (10,000 x $0.15), which is recorded as a Debit Dividends and Credit Dividends Payable. When paid on June 30, 2016, the entry debits Dividends Payable and credits Cash.

The stock dividend declaration on July 15, 2016, involves declaring a 10% stock dividend for 8,000 shares of $10 par stock, which creates additional common stock and APIC accounts based on the market value of $72 per share. The journal entries involve appropriating retained earnings for the total market value of the stock dividend and issuing the additional shares accordingly. Subsequently, the dividend distribution on July 30, 2016, records the issuance of the new shares.

Finally, a stock split on August 10, 2016, of 2-for-1 for 50,000 shares of $15 par stock effectively doubles the number of shares outstanding and halves the par value per share. This impacts the stock accounts but does not require a journal entry, just a memorandum note, or adjustment of the par value.

Conclusion

These entries require careful calculation of amounts, understanding of the nature of each transaction, and adherence to standard accounting principles for journal entry recording. Properly documenting these transactions will ensure accurate financial statements and compliance with accounting standards.

References

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