QUESTION 1 - The following are selected 2017 transactions of Teal Corporation.
Sept. 1Purchased inventory from Encino Company on account for $39,400. Teal records purchases gross and uses a periodic inventory system.Oct. 1Issued a $39,400, 12-month, 8% note to Encino in payment of account.Oct. 1Borrowed $39,400 from the Shore Bank by signing a 12-month, zero-interest-bearing $42,720 note.
Prepare journal entries for the selected transactions above.
QUESTION 2 - Blossom Company issued $576,000 of 10%, 20-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1 and January 1. Blossom Company uses the straight-line method of amortization for bond premium or discount.
Prepare the journal entries to record the following.
(a) The issuance of the bonds.
(b) The payment of interest and the related amortization on July 1, 2017.
(c) The accrual of interest and the related amortization on December 31, 2017.