Accounting

1. 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?
A.  \$0
B.  \$4,800
C.  \$400
D.  \$800

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?
A.  \$0
B.  \$4,800
C.  \$400
D.  \$800

Enter the calculation for your answer here:
1. 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.

Date

Account Names

Debits

Credits

2. 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 loaned plus interest will be due on the maturity date of the note.
How much interest income or interest revenue will Mariner earn for the loan?
A.  \$0
B.  \$4,800
C.  \$400
D.  \$800

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?
A.  \$0
B.  \$4,800
C.  \$400
D.  \$800

2. 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.

Date

Account Names

Debits

Credits

3.  Salaries and Wages Payable on the balance sheet most likely means that:
A. The company is in serious financial difficulty. It doesn’t have enough cash to pay its employees.
B. The company’s accountants are seriously confused. Salaries and Wages are reported on the income statement, not on the balance sheet.
C.  Employees did not receive payment for the last few days of work because the last day of the accounting period was not a payday
D. Employees were overpaid and now owe the company money.

4.  Refer to item 3. above. Is that question an example of:
A. A deferred expense?
B. A prepaid expense?
C.  An accrued revenue?
D. A deferred revenue?
E. An unearned revenue?
F. An accrued expense?

5. 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

5. 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

6. 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

7. Refer to Item 5. above.
Assume that New England made the 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

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