The following selected transactions relate to liabilities of Fairfox Inc., for portions of 2021. Fairfox’s fiscal year ends on December 31. 2021 April 1 Arranged a short-term line of credit with Belize Bank amounting to $20,000,000 at the bank’s prime rate of 12%. The company will pay no commitment fees for this arrangement. July 5 Received a $75,000 refundable deposit from a major customer for mailing containers used to transport the company’s equipment. Oct. 17 Received most of the mailing containers covered by the refundable deposit and a letter stating that the customer will retain containers represented by $12,000 of the deposit and therefore does not request a refund for that amount. The cost of the forfeited containers was $4,500. Aug. 1 Borrowed $7 million cash from Belize Bank under the line of credit arranged in March and issued a ten-month promissory note. Interest at the prime rate of 12% was payable at maturity. Dec. 31 Recorded appropriate adjusting entries for the liabilities described above. Required:
The following selected transactions relate to liabilities of Fairfox Inc., for portions of 2021. Fairfox’s fiscal year ends on December 31. 2021 April 1 Arranged a short-term line of credit with Belize Bank amounting to $20,000,000 at the bank’s prime rate of 12%. The company will pay no commitment fees for this arrangement. July 5 Received a $75,000 refundable deposit from a major customer for mailing containers used to transport the company’s equipment. Oct. 17 Received most of the mailing containers covered by the refundable deposit and a letter stating that the customer will retain containers represented by $12,000 of the deposit and therefore does not request a refund for that amount. The cost of the forfeited containers was $4,500. Aug. 1 Borrowed $7 million cash from Belize Bank under the line of credit arranged in March and issued a ten-month promissory note. Interest at the prime rate of 12% was payable at maturity. Dec. 31 Recorded appropriate adjusting entries for the liabilities described above. Required:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- The following selected transactions relate to liabilities of Fairfox Inc., for portions of 2021. Fairfox’s fiscal year ends on December 31.
2021
- April 1 Arranged a short-term line of credit with Belize Bank amounting to $20,000,000 at the bank’s prime rate of 12%. The company will pay no commitment fees for this arrangement.
- July 5 Received a $75,000 refundable deposit from a major customer for mailing containers used to transport the company’s equipment.
- Oct. 17 Received most of the mailing containers covered by the refundable deposit and a letter stating that the customer will retain containers represented by $12,000 of the deposit and therefore does not request a refund for that amount. The cost of the forfeited containers was $4,500.
- Aug. 1 Borrowed $7 million cash from Belize Bank under the line of credit arranged in March and issued a ten-month promissory note. Interest at the prime rate of 12% was payable at maturity.
- Dec. 31 Recorded appropriate
adjusting entries for the liabilities described above.
Required:
Prepare the appropriate
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