- New England Seafood, Inc. bought a lobster boat on November 1, 2018, from Mariner Boats Company, in exchange for a 12-month, 6%, $80,000 note, and a cash down payment of $20,000.
What entry should the company make on November 1, 2018 for the purchase of the boat?
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | |||
The principal for the amount borrowed plus interest will be due on the maturity date of the note.
| What is the maturity date of the note? Enter your answer —-> |
How much interest expense will the company incur for the loan, if any?
- $0
- $4,800
- $400
- $800
| Enter your answer here ——————————————–> |
| Enter the calculation for your answer here:
|
The company uses accrual-basis accounting and makes monthly entries to adjust accounts. How
much interest expense should the company accrue for the month ended November 30, 2018, if any?
- $0
- $4,800
- $400
- $800
| Enter your answer here ——————————————–> |
| Enter the calculation for your answer here:
|
- Continued.
If you determined that the company should accrue interest expense for the month ended November 30, 2018, what entry should be made for the accrual? Also enter the date of the entry.
| Date | Account Names | Debits | Credits |
The company must make an accrual entry on December 31, 2018 for interest expense incurred. What entry should be made for the accrual?
| Date | Account Names | Debits | Credits |
| 31-Dec-2018 | |||
You previously determined the maturity date of the loan. What amount would the company need to pay to the lender, Mariner Boats Company, on the maturity date?
| Enter the calculation for your answer here:
|
| Record the journal entry the company should make for the payment made to the lender on the maturity date of the loan. Include the date for the entry.
$80,000 x 6% = $4,800, or $80,000 x 0.06 = $4,800. |
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| Date | Account Names | Debits | Credits |
- Refer to Problem 1. above.
What entry should the seller of the boat, Mariner Boats Company, which sold the boat to New England Seafood, Inc. make on November 1, 2018 for the sale of the boat, assuming the boat was purchased by Mariner from the manufacturer for $45,000?
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | |||
The principal for the amount loanedplus interest will be due on the maturity date of the note.
How much interest income or interest revenuewill Mariner earn for the loan?
- $0
- $4,800
- $400
- $800
| Enter your answer here ——————————————–> |
| Enter the calculation for your answer here:
|
The company uses accrual-basis accounting and makes monthly entries to adjust accounts.
How much interest income or interest revenue should the company accrue for the month ended November 30, 2018?
- $0
- $4,800
- $400
- $800
| Enter your answer here ——————————————–> |
- Continued
| Enter the calculation for your answer here:
|
What entry should be made for the accrued income/revenue? Also enter the date of the entry.
| Date | Account Names | Debits | Credits |
The company must make an accrual entry on December 31, 2018 for interest income (or revenue) earned. What entry should be made for the accrual?
| Date | Account Names | Debits | Credits |
| 31-Dec-2018 | |||
What amount should Mariner receive from the borrower on the maturity date?
| Enter the calculation for your answer here:
|
| Record the journal entry Mariner should make for the payment received on the maturity date of the loan. Include the date for the entry.
$80,000 x 6% = $4,800, or $80,000 x 0.06 = $4,800. |
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| Date | Account Names | Debits | Credits |
- Salaries and Wages Payable on the balance sheet most likely means that:
- The company is in serious financial difficulty. It doesn’t have enough cash to pay its employees.
- The company’s accountants are seriously confused. Salaries and Wages are reported on the income statement, not on the balance sheet.
- Employees did not receive payment for the last few days of work because the last day of the accounting period was not a payday
- Employees were overpaid and now owe the company money.
| Enter your answer here ——————————————–> |
- Refer to item 3. above. Is that question an example of:
- A deferred expense?
- A prepaid expense?
- An accrued revenue?
- A deferred revenue?
- An unearned revenue?
- An accrued expense?
| Enter your answer here ——————————————–> |
- Seaside Casualty, Inc. sells insurance to commercial fishing businesses. They sold a policy to New England Seafood, Inc. on November 1, 2018, the same day that New England purchased the lobster boat from Mariner Boats Company. The terms of the policy required that New England pay premiums for six months in advance. The total premium for six months was $18,000. Both companies use accrual-basis accounting and adjust accounts monthly.
What entry should Seaside make on November 1, 2018 to record the sale of the insurance policy?
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | |||
Continued
What entry should New England make on November 1, 2018 to record the purchase of the insurance policy?
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | |||
Seaside records entries monthly for expenses incurred and revenues earned during a month. What entry should Seaside make on November 30, 2018 to record the insurance premium earned for the month?
| Date | Account Names | Debits | Credits |
| 30-Nov-2018 | |||
What entry should Seaside make on January 31, 2019 to record insurance premium earned for the month?
| Date | Account Names | Debits | Credits |
| 31-Jan-2019 | |||
New England records entries monthly for expenses incurred and revenues earned during a month. What entry should New England make on November 30, 2018 to record insurance premium incurred for the month?
| Date | Account Names | Debits | Credits |
| 30-Nov-2018 | |||
- Refer to Item 5. above.
Assume that Seaside Casualty, Inc. made the following entry to record the sale of the insurance policy:
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | Cash | 18,000 | |
| Insurance Revenue | 18,000 | ||
Seaside records entries monthly for expenses incurred and revenues earned during a month. With consideration for the immediately preceding entry, what entry should Seaside make on November 30, 2018 to record the insurance premium earned for the month?
| Date | Account Names | Debits | Credits |
| 30-Nov-2018 | |||
What entry should Seaside make on January 31, 2019 to record the insurance premium earned for the month?
| Date | Account Names | Debits | Credits |
| 31-Jan-2019 | |||
- Refer to Item 5. above.
Assume that New England madethe following entry to record the purchase of the insurance policy:
| Date | Account Names | Debits | Credits |
| 01-Nov-2018 | Insurance Expense | 18,000 | |
| Cash | 18,000 | ||
New England records entries monthly for expenses incurred and revenues earned during a month. With consideration for the immediately preceding entry, above, what entry should New England make on November 30, 2018 to record the insurance premium incurred for the month?
| Date | Account Names | Debits | Credits |
| 30-Nov-2018 | |||
What entry should New England make on January 31, 2019 to record insurance premium incurred for the month?
| Date | Account Names | Debits | Credits |
| 31-Jan-2019 | |||
