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General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
3. The completed exercise/problem may be printed or e-mailed per direction from your instructor.
E9-5
Several accounts that appeared on Kruse’s 2016 balance sheet are as follows:
Accounts Payable 55,000$
Marketable Securities 40,000
Required
55,000$
2. Compute Kruse’s working capital.
3. Compute Kruse’s current ratio. What does this ratio indicate about Kruse’s condition?
1. Prepare the Current Liabilities section of Kruse’s 2016 balance sheet.
KRUSE
BALANCE SHEET
DECEMBER 31, 2016
Current liabilities:
Accounts payable
General Instructions
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, percentages in % cells,
and dollars or numbers in the $ cells.
P9-1
Glencoe Inc. operates with a June 30 year-end. During 2016, the following transactions
occurred:
a. Jan. 1:
Required
a. Jan. 1 Cash 25,000
Notes Payable 25,000
To record loan at 10% interest.
Assets = Liabilities + Stockholders' Equity Revenues
= Net Income
1. Record all journal entries necessary to report these transactions.
BALANCE SHEET
INCOME STATEMENT
– Expenses
Signed a one-year, 10% loan for $25,000. Interest and principal are to be paid at maturity
b. Jan. 10 Only a memorandum entry is made.
Assets = Liabilities + Stockholders' Equity Revenues
= Net Income
Equipment 18,800 Notes Payable 20,000
Discount on Notes
Payable (1,200)
e. June 1 Loan Payable 100,000
Interest Expense 2,250
Cash 102,250
To record partial payment of line of credit
– Expenses
BALANCE SHEET
INCOME STATEMENT
f. June 30 Interest Expense 2,750
Interest Payable 2,750
To record interest on interest-bearing loan.
Assets = Liabilities + Stockholders' Equity
Revenues –= Net Income
+ Stockholders' Equity
Revenues –= Net Income
Interest
Notes Payable 1,000 (1,000) Expense 1,000 (1,000)
g. Aug.1 Notes Payable 20,000
Interest Expense 200
Cash 20,000
h. Sep. 1 Cash 200,000
Notes payable 200,000
To record loan from line of credit.
Assets =
Liabilities
Expenses
Discount on
BALANCE SHEET
INCOME STATEMENT
Expenses
BALANCE SHEET
INCOME STATEMENT
Assets = Liabilities + Stockholders' Equity Revenues
= Net Income
Cash 200,000 Notes
Payable 200,000
j. Dec. 31 Notes Payable 25,000
Interest Payable 1,250
Interest Expense 1,250
Cash 27,500
Repay the 10% note plus interest.
BALANCE SHEET
INCOME STATEMENT
– Expenses
8% note:
12,000$ 8% 160
9,910$
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
3. The completed exercise/problem may be printed or e-mailed per direction from your instructor.
P9-4A
Required
1. How many defective units from this year’s sales does Sound Company estimate will
be returned for repair?
2. What percentage of sales does Sound Company estimate will be returned for repair?
Sound Company manufactures and sells high-quality stereos. The most popular line sells for
General Instructions
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, percentages in % cells,
and dollars or numbers in the $ cells.
P9-9
Required
1. What will be the face value of the note assuming that:
Amount needed
$ 103,200
a. Interest is paid when the loan is due.
b. Interest is deducted in advance.
2. Calculate the effective interest rate on the note assuming that:
3. Assume that Leach negotiates and signs the one-year note with the bank on July 1, 2016. Also, assume that
Leach’s accounting year ends December 31. Prepare all of the journal entries necessary to record the issuance
On July 1, 2016, Leach Company needs exactly $103,200 in cash to pay an existing obligation. Leach has decided to
borrow from State Bank, which charges 14% interest on loans. The loan will be due in one year. Leach is unsure, however,
whether to ask the bank for (a) an interest-bearing loan with interest and principal payable at the end of the year or (b) a
loan due in one year but with interest deducted in advance.
a. Interest is paid when the loan is due?
b. Interest is deducted in advance?
2016
Dec. 31 Interest Expense 7,224
Interest Payable 7,224
To record accrual of interest.
Assets = Liabilities + Stockholders' Equity
Revenues −= Net Income
Interest Interest
Payable 7,224 (7,224) Expense 7,224 (7,224)
BALANCE SHEET
INCOME STATEMENT
Expenses
of the note and the interest on the note assuming that:
a. Interest is paid when the loan is due.
2016
July 1 Cash 103,200
Discount on Notes Payable 16,800
Notes Payable 120,000
To record issuance of note.
Dec 31 Interest Expense 8,400
Discount on Notes Payable 8,400
To record payment of non-interest-bearing note.
Assets + Stockholders' Equity
Revenues −= Net Income
Discount on Interest
Notes Pay. 8,400 (8,400) Expense 8,400 (8,400)
= Liabilities
Expenses
b. Interest is deducted in advance.
BALANCE SHEET
INCOME STATEMENT
Current Liabilities:
issued assuming that:
a. Interest is paid when the loan is due.
b. Interest is deducted in advance.
4. Prepare the appropriate balance sheet presentation for July 1, 2016, immediately after the note has been
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
3. The completed exercise/problem may be printed or e-mailed per direction from your instructor.
P9-11A
Interest rate 12%
Amount deposited 43,200$
Amount accumulated 30,000$
invested?
3. Les Hinckle made a deposit in the bank on January 1, 2009. The bank pays interest at the rate of 8%
compounded annually. On January 1, 2016, the deposit has accumulated to $30,000. How much money did Les
originally deposit on January 1, 2009?
4. Val Hooper deposited $11,600 in the bank on January 1 a few years ago. The bank pays an interest rate of 10%
compounded annually, and the deposit is now worth $30,052. For how many years has the deposit been
The following situations involve the application of the time value of money concept:
1. Jan Cain deposited $19,500 in the bank on January 1, 1999, at an interest rate of 12% compounded annually.
How much has accumulated in the account by January 1, 2016?
2. Mark Schultz deposited $43,200 in the bank on January 1, 2006. On January 2, 2016, this deposit has
accumulated to $84,974. Interest is compounded annually on the account. What rate of interest did Mark earn on
the deposit?
Amount deposited 11,600$
