The following are selected 2014 transactions of Palmeiro Corporation. Sept. 1 Purchased inventory from Ripken Company on

Question:

The following are selected 2014 transactions of Palmeiro Corporation.
Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records purchases gross and uses a periodic inventory system.
Oct. 1 Issued a $125,000, 12-month, 12% note to Ripken in payment of account.
Oct. 1 Borrowed $125,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $142,000 note.

Instructions
(a) Prepare journal entries for the selected transactions above.
(b) Prepare adjusting entries at December 31. (Use straight-line amortization of the discount.)
(c) Compute the total net liability to be reported on the December 31 for:
(1) The interest-bearing note.
(2) The zero-interest-bearing note. (Use straight-line amortization.)

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...