Answer 4 – “Answers only for Vaughn Company, Bennett Enterprise”

Question No. 1

Vaughn Company
Balance Sheet (Partial)
January 31, 2022
 
Current Liabilities:  
Accounts payable $57,000
Notes Payable 22,500
Sales Taxes Payable* 5,808
Unearned Service Revenue** 5,500
Warranty Liability*** 3,150
Interest payable 50
   
Total Current Liabilities $94,008
   

*Sales Taxes Payable = (1,520 + 3,600 + 688) = 5,808

**Unearned service revenue = (16,500 – 10,500) = 6,000
***Warranty Liability = (45,000 x 7%) = 3,150
****Interest payable = (22,500 x 8% x 1/12 x10/30) = 50

S.no. Accounts title and explanations Debit Credit

Journal entries
Jan 5 Cash 20,520  
     Sales Taxes Payable   1,520
     Sales revenue   19,000
  (for sales made for cash)    
     
Jan 12 Unearned Service Revenue 10,500  
      Service Revenue   10,500
  (for revenue earned)    
     
Jan 14 Sales Taxes Payable 8,400  
      Cash    8,400
  (for taxes paid)    
     
Jan 20 Accounts Receivable 48,600  
     Sales Taxes Payable   3,600
     Sales Revenue (900*50)   45,000
     
 Jan 21 Cash 22,500  
     Notes Payable   22,500
  (for amount borrowed)    
     
Jan 25 Cash 9,288  
     Sales Taxes Payable   688
     Sales Revenue   8,600
  (for sales made for cash)    
     
Adjusting entry
Jan 31 Interest Expense 50  
       Interest Payable (22500*8%*1/12*10/30)   50
  (for interest due)    
     
Jan 31 Warranty Expense (45000 *7%) 3,150  
      Warranty Liability   3,150
  (for warranty expense incurred)    

Question No. 2

Entries for notes payable

Bennett Enterprises issues a $528,000, 45-day, 6%, note to Spectrum Industries for
merchandise inventory.

Assume a 360-day year. If required, round your answers to the nearest dollar. If an
amount box does not require an entry, leave it blank.

a. Journalize Bennett Enterprises' entries to record:

Transaction General Journal Debit Credit

1 Inventory $ 528,000  
  Notes Payable   $ 528,000
       
2 Notes Payable 528,000  
Interest expense
  3,960  
($528,000*6%*45/360)
  Cash   531,960

b. Journalize Spectrum Industries' entries to record:

Transaction General Journal Debit Credit

1 Notes Receivable $ 528,000  
  Sales   $ 528,000
       
2 Cash 531,960  
  Notes Receivable   528,000
Interest Revenue
    3,960
($528,000*6%*45/360)