Assume that LBJ Group (LBJ), a European engineering firm, engaged in the following six transactions during the

Question:

Assume that LBJ Group (LBJ), a European engineering firm, engaged in the following six transactions during the year ended December 31, Year 3. LBJ applies U.S. GAAP and reports its results in millions of U.S. dollars. Give the journal entries to record (1) each of the six transactions, and (2) any necessary adjusting entries on December 31, Year 3. You may omit explanations for the journal entries. Assume the six transactions are independent of each other.

a. On November 1, Year 3, LBJ gives a 90-day note to a supplier in exchange for inventory purchased costing $180,000. The note bears interest at 8% per year and is due on January 31, Year 4.

b. On December 5, Year 3, LBJ receives $842,000 in cash from a customer for products and services that LBJ will deliver in January Year 4.

c. LBJ acquires a machine on October 1, Year 3, for $1,400,000 cash. It expects the machine to have a $160,000 salvage value and a 10-year life.

d. On September 30, Year 3, LBJ sells merchandise to a customer, on credit, for $565,000. The merchandise has a cost to LBJ of $422,000.

e. LBJ purchases insurance on its headquarters building on September 1, Year 3, for the next 12 months beginning on that date. It pays the $360,000 insurance premium in cash.

f. On November 16, Year 3, LBJ issues 40,000 shares of common stock with a par value of $1 for $26 per share. LBJ uses the cash proceeds to repay accounts payable.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...