Self-Study Review Problem 7-1 (Algo) Perfect Picture Inc. (PPI) experienced the following transactions during Year 2. The transactions are summarized (transaction data pertain to the full year) and limited to those that affect the company's current liabilities. 1. PPI had cash sales of $825,000. The state requires that PPI charge customers an 6 percent sales tax (ignore cost of goods sold). 2. PPI paid the state sales tax authority $44,000. 3. On March 1, PPI issued a note payable to the County Bank. PPI received $55,000 cash (principal balance). The note had a one-year term and a 6 percent annual interest rate. 4. On December 31, PPI recognized accrued interest on the note issued in Event 3. 5. On December 31, PPI recognized warranty expense at the rate of 3 percent of sales. 6. PPI paid $21,000 cash to settle warranty claims. 7. On January 1, Year 1, PPI issued a $105,000 installment note. The note had a 10-year term and a 6 percent interest rate. PPI agreed to repay the principal and interest in 10 annual interest payments of $14,266.13 at the end of each year. While the note was issued in Year 1, the effects of interest appear in the Year 2 balance sheet.

Self-Study Review Problem 7-1 (Algo) Perfect Picture Inc. (PPI) experienced the following transactions during Year 2. The transactions are summarized (transaction data pertain to the full year) and limited to those that affect the company's current liabilities. 1. PPI had cash sales of $825,000. The state requires that PPI charge customers an 6 percent sales tax (ignore cost of goods sold). 2. PPI paid the state sales tax authority $44,000. 3. On March 1, PPI issued a note payable to the County Bank. PPI received $55,000 cash (principal balance). The note had a one-year term and a 6 percent annual interest rate. 4. On December 31, PPI recognized accrued interest on the note issued in Event 3. 5. On December 31, PPI recognized warranty expense at the rate of 3 percent of sales. 6. PPI paid $21,000 cash to settle warranty claims. 7. On January 1, Year 1, PPI issued a $105,000 installment note. The note had a 10-year term and a 6 percent interest rate. PPI agreed to repay the principal and interest in 10 annual interest payments of $14,266.13 at the end of each year. While the note was issued in Year 1, the effects of interest appear in the Year 2 balance sheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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