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REVISED _Current Liabilities in advanced auditing.pptx
1. Listed below are a few transactions and events of Piper Company.
b. The company earned $50,000 of $125,000 previously received in advance and originally recorded as unearned
services revenue.
Date Debit Credit
Dec. 31 Cash ($10,000 x 104%) 10,400
10,000
400
Dec. 31 5,000
5,000
Dec. 31 50,000
50,000
Sales Taxes Payable ($10,000 x 4%)
Earned Services Revenue
a. Piper Company records a year-end entry for $10,000 of previously unrecorded cash sales (costing $5,000) and its
sales taxes at a rate of 4%.
Prepare any necessary adjusting entries at Dec 31, 2017, for Piper Company’s year-end financial statements for each
of the above separate transactions and events.
General Journal
Sales
Cost of Goods Sold
Merchandise Inventory
Unearned Services Revenue
Exercise 11-2 page 494
2. Listed below are a few transactions and events of Piper Company.
b. The company earned $32,000 of $80,000 previously received in advance and originally recorded as unearned
services revenue.
Date Debit Credit
Dec. 31 Cash ($160,000 x 105%) 168,000
160,000
8,000
Dec. 31 80,000
80,000
Dec. 31 32,000
32,000
Sales Taxes Payable ($160,000 x 5%)
Earned Services Revenue
a. Piper Company records a year-end entry for $160,000 of previously unrecorded cash sales (costing $80,000) and
its sales taxes at a rate of 5%.
Prepare any necessary adjusting entries at December 31, 2017, for Piper Company’s year-end financial
statements for each of the above separate transactions and events.
General Journal
Sales
Cost of Goods Sold
Merchandise Inventory
Unearned Services Revenue
Exercise 11-2 page 494 Alternate
3. Sylvestor Systems borrows $110,000 cash on May 15, 2017, by signing a 60-day, 12% note.
1. On what date does this note mature? July 14, 2017
From: To: Days
May 15 May 31 16 days
May 31 June 30 30 days
June 30 July 14 14 days
Term of note 60 days
2. Assume the face value of the note equals $110,000, the principal of the loan.
(a) Prepare the journal entry to record issuance of the note.
Date Debit Credit
May 15 Cash 110,000
110,000
Notes payable
General Journal
Exercise 11-3 page 494
4. Sylvestor Systems borrows $110,000 cash on May 15, 2017, by signing a 60-day, 12% note.
1. On what date does this note mature? July 14, 2017
(a) Prepare the journal entry to record issuance of the note.
Date Debit Credit
May 15 Cash 110,000
110,000
Notes payable
General Journal
Date Debit Credit
Jul. 14 Notes payable 110,000
2,200
112,200
$2,200
General Journal
Interest expense ($110,000 x 12% x 60/360)
Cash
(b) Prepare the journal entry to record payment of the note at maturity. (Use 360 days a year. Do not round intermediate
calculations.)
Interest = Principal x Rate x Time
$110,000 x 12% x (60/360)
Exercise 11-3 page 494
5. Sylvestor Systems borrows $161,000 cash on May 15, 2017, by signing a 30-day, 7% note.
1. On what date does this note mature? June 14, 2017
From: To:
May 15 May 31 16 days
May 31 June 14 14 days
Term of note 30 days
2. Assume the face value of the note equals $161,000, the principal of the loan.
(a) Prepare the journal entry to record issuance of the note.
Date Debit Credit
May 15 Cash 161,000
161,000
Notes payable
General Journal
Exercise 11-3 page 494 Alternate
6. Sylvestor Systems borrows $161,000 cash on May 15, 2017, by signing a 30-day, 7% note.
1. On what date does this note mature? June 14, 2017
2. Assume the face value of the note equals $161,000, the principal of the loan.
(a) Prepare the journal entry to record issuance of the note.
Date Debit Credit
May 15 Cash 161,000
161,000
Date Debit Credit
Jun. 14 Notes payable 161,000
939
161,939
$939
General Journal
Interest expense ($161,000 x 7% x 30/360)
Cash
(b) Prepare the journal entry to record payment of the note at maturity. (Use 360 days a year. Do not round intermediate
calculations.)
Notes payable
Interest = Principal x Rate x Time
$161,000 x 7% x (30/360)
General Journal
Exercise 11-3 page 494 Alternate
7. 1. On what date does this note mature?
Total
through
maturity
2017 Interest
Expense
2018 Interest
Expense
Principal $200,000 $200,000 $200,000
Rate (%) 9% 9% 9%
Time 90/360 60/360 30/360
Total interest $4,500 $3,000 $1,500
January 30, 2018
Keesha Co. borrows $200,000 cash on November 1, 2017, by signing a 90-day, 9% note with a face value of
$200,000.
4 (a) Prepare the journal entry to record the issuance of the note on November 1, 2017.
Date Debit Credit
Nov. 01, 2017 Cash 200,000
200,000
4 (b) Prepare the journal entry to record the accrual of interest at the end of 2017.
Date Debit Credit
Dec. 31, 2017 Interest expense ($200,000 x 9% x 60/360) 3,000
3,000
General Journal
Interest payable
General Journal
Notes payable
Exercise 11-4 page 494
8. 1. On what date does this note mature?
Total
through
maturity
2017 Interest
Expense
2018 Interest
Expense
Principal $200,000 $200,000 $200,000
Rate (%) 9% 9% 9%
Time 90/360 60/360 30/360
Total interest $4,500 $3,000 $1,500
January 30, 2018
Keesha Co. borrows $200,000 cash on November 1, 2017, by signing a 90-day, 9% note with a face value of
$200,000.
Date Debit Credit
Jan. 30, 2018 Notes payable 200,000
3,000
1,500
204,500
4 (c) Prepare the journal entry to record payment of the note at maturity. (Assume no reversing entries)
General Journal
Cash ($200,000 + ($200,000 x 9% x 60/360))
Interest payable ($200,000 x 9% x 60/360)
Interest expense ($200,000 x 9% x 30/360)
Exercise 11-4 page 494
9. 1. On what date does this note mature?
Total
through
maturity
2017 Interest
Expense
2018 Interest
Expense
Principal $120,000 $120,000 $120,000
Rate (%) 9% 9% 9%
Time 90/360 60/360 30/360
Total interest $2,700 $1,800 $900
January 30, 2018
Keesha Co. borrows $120,000 cash on November 1, 2017, by signing a 90-day, 9% note with a face value of
$120,000.
4 (a) Prepare the journal entry to record the issuance of the note on November 1, 2017.
Date Debit Credit
Nov. 01, 2017 Cash 120,000
120,000
4 (b) Prepare the journal entry to record the accrual of interest at the end of 2017.
Date Debit Credit
Dec. 31, 2017 Interest expense ($120,000 x 9% x 60/360) 1,800
1,800
General Journal
Interest payable
General Journal
Notes payable
Exercise 11-4 page 494 Alternate
10. 1. On what date does this note mature?
Total
through
maturity
2017 Interest
Expense
2018 Interest
Expense
Principal $120,000 $120,000 $120,000
Rate (%) 9% 9% 9%
Time 90/360 60/360 30/360
Total interest $2,700 $1,800 $900
January 30, 2018
Keesha Co. borrows $120,000 cash on November 1, 2017, by signing a 90-day, 9% note with a face value of
$120,000.
Date Debit Credit
Jan. 30, 2018 Notes payable 120,000
1,800
900
122,700
4 (c) Prepare the journal entry to record payment of the note at maturity. (Assume no reversing entries.)
General Journal
Cash ($120,000 + ($120,000 x 9% x 60/360))
Interest payable ($120,000 x 9% x 60/360)
Interest expense ($120,000 x 9% x 30/360)
Exercise 11-4 page 494 Alternate
11. Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2017, for
$6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2018, the copier requires on-site
repairs that are completed the same day. The repairs cost $209 for materials taken from the Repair Parts
Inventory. These are the only repairs required in 2018 for this copier. Based on experience, Hitzu expects to
incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end
of each year.
5(a) Prepare the journal entries to record the copier's sale.
Date Debit Credit
Aug. 16 Cash 6,000
6,000
4,800
4,800
5(b) Prepare the journal entry to record the adjustment on December 31, 2017, to record the warranty expense.
Date Debit Credit
Dec. 31 Warranty expense ($6,000 x 4%) 240
240
5(c) Prepare the journal entry to record the repairs that occur in November 2018.
Date Debit Credit
Nov. 22 Estimated warranty liability 209
209
General Journal
Repair parts inventory
Merchandise inventory
General Journal
Estimated warranty liability
Cost of goods sold
General Journal
Sales
Exercise 11-10 page 496
12. 5(a) Prepare the journal entries to record the copier's sale.
Date Debit Credit
Aug. 16 Cash 11,000
11,000
5,500
5,500
5(b) Prepare the journal entry to record the adjustment on December 31, 2017, to record the warranty expense.
Date Debit Credit
Dec. 31 Warranty expense ($11,000 x 5%) 550
550
5(c) Prepare the journal entry to record the repairs that occur in November 2018.
Date Debit Credit
Nov. 22 Estimated warranty liability 141
141
General Journal
Repair parts inventory
General Journal
Sales
Cost of goods sold
Merchandise inventory
General Journal
Estimated warranty liability
Exercise 11-10 page 496 Alternate
Hitzu Co. sold a copier costing $5,500 with a two-year parts warranty to a customer on August 16, 2017, for $11,000
cash. Hitzu uses the perpetual inventory system. On November 22, 2018, the copier requires on-site repairs that are
completed the same day. The repairs cost $141 for materials taken from the Repair Parts Inventory. These are the
only repairs required in 2018 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 5%
of dollar sales. It records warranty expense with an adjusting entry at the end of each year.
13. 1. Prepare the journal entry at December 31, 2017, to record the bonus due the employees.
Date Debit Credit
12/31/2017 Employee bonus expense 14,563
14,563
General Journal
Bonus payable
For the year ended December 31, 2017, Lopez Company has implemented an employee bonus program
based on Lopez’s net income, which employees will share equally. Lopez’s bonus expense is computed as $14,563.
Exercise 11-11 page 496
2. Prepare the journal entry at January 19, 2018 to record payment of the bonus.
Date Debit Credit
1/19/2018 Bonus payable 14,563
14,563
General Journal
Cash
14. 1. Prepare the journal entry at December 31, 2017, to record the bonus due the employees.
Date Debit Credit
Dec. 31, 2017 Employee bonus expense 65,000
65,000
General Journal
Bonus payable
For the year ended December 31, 2017, Lopez Company has implemented an employee bonus program based
on Lopez’s net income, which employees will share equally. Lopez’s bonus expense is computed as $65,000.
Exercise 11-11 page 496 Alternate
2. Prepare the journal entry at January 19, 2018 to record payment of the bonus.
Date Debit Credit
Jan. 19, 2018 Bonus payable 65,000
65,000
General Journal
Cash