A2 Chapter 8: Notes Payable, Prepaid & Accrued Expenses

Jones Company has a 90-day, 12% note payable for $6,500, dated December 17, on which interest has accrued. On December 31, adjusting entries were recorded for the accrued interest. On January 1, reversing entries were recorded to prepare the accounts for the new fiscal period. On the maturity date, the correct journal entry to record payment of the note payable is:

• debit Notes Payable, Interest Income; credit Cash.
• debit Cash, Interest Income; credit Notes Payable.
• debit Notes Payable, Interest Expense; credit Cash.
• debit Cash, Interest Expense; credit Notes Payable.

The appropriate adjusting entry for Accrued Federal Income Tax Expense is:

• debit Federal Income Tax Payable; credit Federal Income Tax Expense.

• debit Federal Income Tax Expense; credit Federal Income Tax Payable.

• debit Salaries Payable; credit Federal Payroll Tax Expense.

• debit Federal Tax Expense; credit Salaries Payable.

On January 1, after adjusting and closing entries have been posted, the appropriate reversing entry for Accrued Salary Expenses is:

• debit Payroll Taxes Expense; credit Salaries Payable.

• debit Salary Expense; credit Salaries Payable.

• debit Employee Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable, Salaries Payable; credit Salaries Expense-Sales, Salaries Expense-Administrative.

• debit Salaries Expense-Sales, Salaries Expense-Administrative; credit Employee Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable, Salaries Payable.

Shaw Company initially recorded the purchase of supplies as an expense. On January 1, after adjusting and closing entries have been posted, a reversing entry is needed. If the ending inventory is $4,050, the reversing entry is:

• debit Supplies-Sales, $1,225; credit Supplies Expense-Sales, $1,225.

• debit Supplies-Sales, $4,050; credit Supplies Expense-Sales, $4,050.

• debit Supplies Expense-Sales, $1,225; credit Supplies-Sales, $1,225.

• debit Supplies Expense-Sales, $4,050; credit Supplies-Sales, $4,050.

Jones Company has a 90-day, 12% note payable for $6,500.00, dated December 17, on which interested has accrued. On January 1, after adjusting and closing entries have been posted, the appropriate reversing entry is:

**Use 360 day year to compute**

• debit Interest Expense, $30.33; credit Interest Payable, $30.33.

• debit Interest Payable, $30.33; credit Interest Expense, $30.33.

• debit Interest Expense, $36.83; credit Interest Payable, $36.83.

• debit Interest Payable, $36.83; credit Interest Expense, $36.83.

Shaw Company initially recorded the purchase of supplies as an expense. If the ending inventory is $2,050, the adjusting entry is:

• debit Supplies-Office, $2,050; credit Supplies Expense-Office, $2,050.

• debit Supplies-Office, $6,950; credit Supplies Expense-Office, $6,950.

• debit Supplies Expense-Office, $2,050; credit Supplies-Office, $2,050.

• debit Supplies Expense-Office, $6,950; credit Supplies-Office, $6,950.

The appropriate adjusting entry for Accrued Employer Payroll Taxes Expense is:

• debit Employee Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable, Salaries Payable; credit Salaries Expense-Administrative, Salaries Expense-Sales.

• debit Social Security Tax Payable, Medicare Tax Payable, Unemployment Tax Payable-Federal, Unemployment Tax Payable-State; credit Payroll Taxes Expense.

• debit Salaries Expense-Administrative, Salaries Expense-Sales; credit Employee Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable, Salaries Payable.

• debit Payroll Tax Expense; credit Social Security Tax Payable, Medicare Tax Payable, Unemployment Tax Payable-Federal, Unemployment Tax Payable-State.

Shaw Company initially recorded the purchase of supplies as an expense. On January 1, after adjusting and closing entries have been posted, a reversing entry is needed. If the ending inventory of supplies is $2,050, the correct reversing entry is:

• debit Supplies-Office, $2,050; credit Supplies Expense-Office, $2,050.

• debit Supplies-Office, $6,950; credit Supplies Expense-Office, $6,950.

• debit Supplies Expense-Office, $2,050; credit Supplies-Office, $2,050.

• debit Supplies Expense-Office, $6,950; credit Supplies-Office, $6,950.

Brown Company has a 90-day, 15% note payable for $8,000.00, dated December 12, on which interest has accrued. As of December 31 of the current year, the appropriate adjusting entry to record the accrued interest is:

**Use 360 day year to compute**

• debit Interest Payable, $63.33; credit Interest Expense, $63.33.

• debit Interest Expense, $63.33; credit Interest Payable, $63.33.

• debit Interest Expense, $300.00; credit Interest Payable, $300.00.

• debit Interest Payable, $300.00; credit Interest Expense, $300.00.

On December 5, Johnson Company borrowed $3,000.00 from Bulldog Bank and Trust by issuing a 30-day, non-interest-bearing note payable. The bank discounted the note at 15%, deducting $37.50 in advance. The amount of interest expense for the current period is $32.50. On December 31, Johnson Company needs to record the adjusting entry for prepaid interest expense. The correct adjusting entry for this transaction is:

• debit Discount on Notes Payable, $32.50; credit Interest Expense, $32.50.

• debit Interest Expense, $32.50; credit Discount on Notes Payable, $32.50.

• debit Notes Payable, $37.50; credit Interest Income, $37.50.

• debit Interest Income, $37.50; credit Notes Payable, $37.50.