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5. A three-year, 4.25%, $126,000 note payable issued on October 1, 2014. Juniper Bush Farm is required
to pay $3,500 plus interest on the first day of each month starting on November 1, 2014. All payments
are up to date.
Mr.Scorcia
6. A four-year, 5%, $50,000 note payable issued on March 31, 2013. Juniper Bush Farm is required to
pay $12,500 every March 31 starting in 2014. Interest is payable monthly at the end of the month,
starting on April 30, 2013.
April 13, 2015
PROBLEM SET 5
Instructions
(a) Calculate the current portion of each note payable.
(b) Calculate the non-current portion of each note payable.
(c) Calculate any interest payable at December 31, 2014.
TA K I N G I T F U R T H E R9-10
What are the costs and benefits to the maker and the payee of the note of using
CHAPTERS
a note payable in place of an account payable?
P10–2B MileHi Mountain Bikes markets mountain-bike tours to clients vacationing in various locations Record note transactions;
in the mountains of British Columbia. The current liabilities section of the October 31, 2013, balance show financial statement
sheet included notes payable of $15,000 and interest payable of $375 related to a six-month, 6% note presentation. (SO 1, 4) AP
payable to Eifert Company on December 1, 2013.
During the year ended October 31, 2014, MileHi had the following transactions related to notes
payable:
2013
Dec. 1
2014
Apr. 1
30
May 31
July 1
Aug. 31
Oct. 1
1
Paid the $15,000 Eifert note, plus interest.
Issued a $75,000, nine-month, 7% note to Mountain Real Estate for the purchase of additional
mountain property on which to build bike trails. Interest is payable quarterly on July 1,
October 1, and at maturity on January 1, 2015.
Purchased Mongoose bikes to use as rentals for $8,000, terms n/30.
Issued Mongoose an $8,000, three-month, 8% note payable in settlement of its account (see
April 30 transaction). Interest is payable at maturity.
Paid interest on the Mountain Real Estate note (see April 1 transaction).
Paid the Mongoose note, plus interest (see May 31 transaction).
Paid interest on the Mountain Real Estate note (see April 1 transaction).
Borrowed $90,000 cash from Western Bank by issuing a five-year, 6% note. Interest is payable
monthly on the first of the month. Principal payments of $18,000 must be made on the anniversary
of the note each year.
Instructions
(a) Record the transactions and any adjustments required at October 31, 2014.
(b) Show the balance sheet presentation of notes payable and interest payable at October 31, 2014.
(c) Show the income statement presentation of interest expense for the year.
All rights reserved. Copyright 2014, John Wiley & Sons Canada, Ltd.
1
2. The estimated warranty liability
(c) Prepare the current liabilities section of the balance sheet at January 31.
Mr.Scorcia
warranty
tions.
AP
Do you think that the loyalty rewards points represent a current or long-term
liability? Explain the reasons for your choice.
TA K I N G I T F U R T H E R
P10–4B On January 1, 2012, Logue Company began a warranty program to stimulate sales. It is estimated
that 5% of the units sold will be returned for repair at an estimated cost of $25 per unit. Sales and
warranty figures for the three years ended December 31 are as follows:
Sales (units)
Sales price per unit
Units returned for repair under warranty
Actual warranty costs
mpanyChapter12AccountingforPartnerships.indd
Page 2 14/03/14 9:51 PM f-391
Instructions
PTER 12
and record
f profit. Prepare
of partners’
O 3, 4) AP
2012
2013
2014
1,200
$100
60
$1,275
1,320
$105
70
$1,600
1,420
$110
80
$1,960
/204/WB01123_ONL/XXXXXXXXXXXXX/ch12/text_s
(a) Calculate the warranty expense for each year and warranty liability at the end of each year.
(b) Record the warranty transactions for each year. Credit Repair Parts Inventory for the actual warranty
costs.
(c) To date, what percentage of the units sold have been returned for repair under warranty? What has
Weygandt
Principles
of Financial
Accounting:
Canadian
Edition
beenet
theal.,
average
actual warranty
cost per
unit for the three-year
period?
TA K I NAt
G the
I T Fend
U Rof
T Hits
E RfirstSuppose
at December
2014, management
reassesses
its original
P12–3B
year of operations,
on31,
December
31, 2014, LBG
Company’s
accountsestimates
show
and
decides
that
it
is
more
likely
that
the
company
will
have
to
service
7%
of
the
units
sold in 2014.
the following:
Management also determines that the original estimate of the cost per unit is the appropriate cost to
use for future repair work. What
should be theDrawings
balance in the warranty
liability account at December 31,
Partner
Capital
2014?
S. Little
$20,000
$65,000
L. Brown
P. Gerhardt
15,000
10,000
45,000
25,000
All rights reserved. Copyright 2014, John Wiley & Sons Canada, Ltd.
The capital balance represents each partner’s initial capital investment on January 1, 2014. No closing
entries have been recorded for profit (loss) or drawings as yet.
AccompanyChapter12AccountingforPartnerships.indd Page 4 14/03/14 9:51 PM f-391
CHAPTER 12
April 13, 2015
/204/WB01123_ONL/XXXXXXXXXXXXX/ch12/text_s
Instructions
(a) Journalize the entry to record the division of profit for the year ended December 31, 2014, under
each of the following independent assumptions:
1. Profit is $55,000. Little, Brown, and Gerhardt are given salary allowances of $5,000, $25,000, and
$10,000, respectively. The remainder is shared equally.
Weygandt et al., Principles of Financial Accounting: Canadian Edition
2. Profit is $25,000. Each partner is allowed interest of 5% on beginning capital balances. Brown
and Gerhardt are given salary allowances of $15,000 and $20,000, respectively. The remainder is
TA Kshared
I N G I T3:2:1.
F U R T H E R Caitlin is not happy about how the profit was allocated. She says that she works
twice
as
hard
Fiona.
argues
that she
made a account.
larger contribution to start the partnership. What
(b) Journalize theasentry
to Fiona
close each
partner’s
drawings
should
Caitlin
and
Fiona
do
to
deal
with
their
concerns?
(c) Prepare a statement of partners’ equity for the year under assumption (2) in (a) above.
rd admission of
ner. (SO 5) AP
30 of the
current
year, partners’
balances and
profit
and loss
ratios ininNEW
TA K IP12–7B
N G I T FAt
U RSeptember
T H E R Explain
why
partnerships
such ascapital
LBG Company
include
a salary
allowance
division of profit
epare income
, statement
rs’ equity, and
ntries.
AP
Balance
Profitthe
andfollowing
Loss Ratio
P12–4B Terry Lam andPartner
Chris Tan have aCapital
partnership
agreement with
provisions for
$62,000
5
sharing profit or loss: A. Nolan
D. Elder
$48,000
4
1. A salary allowance of $25,000 to Lam and $35,000 to Tan
T. Wuhan
$14,000
1
2. An interest allowance of 6% on capital balances at the beginning of the year
3. TheOn
remainder
Lam
and Tanbyonadmitting
a 3:4 basis
Octoberto1,be
thedivided
NEWSbetween
Company
is formed
C. Santos to the partnership.
as follows: arrangements.
their Company
profit- andare
loss-sharing
The
capital balances on February 1, 2013, for T. Lam and C. Tan were $110,000 and $130,000,
Instructions
respectively.
Forthe
theadmission
year ended
2014,each
the of
Lam
Partnership
had sales
of $395,000; cost
Journalize
of January
C. Santos31,
under
theTan
following
independent
assumptions:
of goods
sold
of
$275,000;
operating
expenses
of
$150,000;
T.
Lam
drawings
of
$25,000;
(a) Santos purchases 25% of Nolan’s ownership interest by paying Nolan $20,000 cash.and C. Tan
drawings
$35,000.
(b) of
Santos
purchases 331/3% of Elder’s ownership interest by paying Elder $20,000 cash.
(c) Santos invests $80,000 for a 30% ownership interest.
Instructions
(d) Santos
invests statement
$36,000 forfor
a 30%
ownership
interest. for the year.
(a) Prepare
an income
the Lam
Tan Partnership
(e) How
much would
Santos
have
invest
the
30%
ownership interest so there is
(b) Prepare
a schedule
to show
how
the to
profit
or in
loss
is partnership
allocated to for
the atwo
partners.
no bonus
to theofexisting
partners
(c) Prepare
a statement
partners’
equityor
forthe
thenew
year.partner?
(d) Prepare closing entries on January 31, 2014.
TA K I N G I T F U R T H E R Why would the existing partners be willing to give a bonus to the new partner?
where
might
happen. between the salary allowance specified in
TA K IGive
N G Ian
T example
F U R T H Eof
R a situation
In general,
whatthis
is the
relationship
the profit and loss ratio and a partner’s drawings?
2
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