Camden Biotechnology began operations in September 2013. The following selected transactions relate to liabilities of the company for September 2013


Camden Biotechnology began operations in September 2013. The following selected transactions relate to liabilities of the company for September 2013 through March 2014. Camden's fiscal year ends on December 31.

Its financial statements are issued in April.


a. On September 5, opened checking accounts at Second Commercial Bank and negotiated a short-term line of credit of up to $15,000,000 at the bank's prime rate (10.5% at the time). The company will pay no commitment fees.

b. On October 1, borrowed $12 million cash from Second Commercial Bank under the line of credit and issued a five-month promissory note. Interest at the prime rate of 10% was payable at maturity. Management planned to issue 10-year bonds in February to repay the note.

c. Received $2,600 of refundable deposits in December for reusable containers used to transport and store chemical-based products.

d. For the September-December period, sales on account totaled $4,100,000. The state sales tax rate is 3% and the local sales tax rate is 3%. (This is a summary journal entry for the many individual sales transactions for the period.)

e. Recorded the adjusting entry for accrued interest.


f. In February, issued $10 million of 10-year bonds at face value and paid the bank loan on the March 1 due date.

g. Half of the storage containers covered by refundable deposits were returned in March. The remaining containers are expected to be returned during the next six months.


1. Prepare the appropriate journal entries for these transactions.

2. Prepare the current and long-term liability sections of the December 31, 2013, balance sheet. Trade accounts payable on that date were $252,000.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...

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Intermediate accounting

ISBN: 978-0077647094

7th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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Question Posted: December 23, 2013 10:41:33