Accounting for liabilities

Accounting for liabilities

There are 3 accounting problems to work out. Each problem has a series of steps that must be completed. Any questions please contact me.

Problem 1)
On November 1, 2013, ABC Company borrowed $200,000 for 90 days at 9% interest by signing a note. Assume that the face value of the note equals the principal of the

loan. Prepare three general journal entries to record issuing the note, accrual of interest at the end of 2013 and the payment of the note at maturity.?
These are four requirements that must be met for each journal entry: A) Date of transactions, B) Titles of affected accounts, C) dollar amount of each debit and

credit, D) Explanation of the transaction

Problem 2)
Part1
Assume that your company is in business and you  must borrow $6,000 cash for short-term needs. You have been shopping banks for a loan and have two options:

a) Sign a $6,000, 90 day, 10% interest-bearing note dated June 1
b) Sign a $6,000, 120 day, 8% interest bearing note dated June 1

Part 2-Prepare the following journal entries:

a)    Option A—at date of issuance
b)    Option A—at maturity date
c)    Option B—at date of issuance
d) Option B—at maturity date

Part 3- Explain the entries prepared:

Part 4-Assume that the funds are borrowed on December 1(instead of June 1) and your business operated on a calendar-year reporting period. Prepare one of the following

entries:

a)Option A- the year end adjustment
b)Option A-at maturity date
c)Option B-the year end adjustment
d) OptionB-at maturity date

Problem 3)
Adria Lopez created Success Systems on Oct. 1 2013. The company has been successful and Adria plans to expand her business. She believes that an additional $86,000 is

needed and is investigating three funding sources.
a)    Adria’s sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Adria currently has about $129,000 invested in the business,

Cicely’s investment will mean that Adria will maintain about 60% ownership, and Cicely will have 40% ownership of Success Systems.
b)    Adria’s uncle Marcello is willing to invest at $86,000 in the business as a preferred shareholder.  Marcello would purchase 860 shares of $100 par value, 7%

preferred stock.
c)    Adria’s banker is willing to lend her $86,000 on a 7% 10 year note payable. She wold make monthly payments of $1,000 per month for 10years.

Required:

1.    Prepare the journal entry to reflect the initial $86,000 investment under each of the options. (a), (b) and (c).
2.    Evaluate the three proposals for expansion, providing the pros and cons of each option.
Which option do you recommendAdria to adopt? Explain

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