P12.1 (LO 1) Groupwork (Current Liability Entries and Adjustments) Described below are certain transactions of Edwardson AG. The company uses the periodic inventory system.

1. On February 2, the company purchased goods from Martin Company for €70,000 subject to cash discount terms of 2/10, n/30. Purchases and accounts payable are recorded by Edwardson at net amounts after cash discounts. The invoice was paid on February 26.

2. On April 1, the company bought a truck for €50,000, paying €4,000 in cash and signing a 1-year, 12%

note for the balance of the purchase price.

3. On August 1, the board of directors declared a €300,000 cash dividend that was payable on September 10 to shareholders of record on August 31.

Instructions

a. Make all the journal entries necessary to record the transactions above using appropriate dates.

b. Edwardson’s year-end is December 31. Assuming that no adjusting entries relative to the transactions above have been recorded, prepare any adjusting journal entries concerning interest that are necessary to present fair financial statements at December 31.

P12.2 (LO 1, 2) (Liability Entries) Listed below are selected transactions of Schultz Department Store for the current year ending December 31.

1. On December 5, the store received €500 from the Jackson Players as a deposit to be returned after certain furniture to be used in stage production is returned on January 15.

2. During December, cash sales totaled €798,000, which includes the 5% VAT that must be remitted to the tax authority by the 15th day of the following month.

3. On December 10, the store purchased for cash three delivery trucks for €120,000. The trucks were purchased in a jurisdiction that applies a 5% VAT.

4. The store determined it will cost €100,000 to restore the area surrounding one of its store parking lots, when the store is closed in 2 years. Schultz estimates the fair value of the obligation at December 31 is

€84,000.

Instructions Prepare all the journal entries necessary to record the transactions noted above as they occurred and any adjusting journal entries relative to the transactions that would be required to present fair financial statements at December 31. Date each entry. For simplicity, assume that adjusting entries are recorded only once a year on December 31.