Chapter 12, Problem 12.31AP

Journalizing liability transactions and reporting them on the balance sheet

T he following transactions of Smith Pharmacies occurred during 2016 and 2017:

2016
Mar. 1	Borrowed $240,000 from Naples Bank. The eight-year, 7% note requires payments due annually, on March 1. Each payment consists of $30,000 principal plus one year's interest.
Dec. 1	Mortgaged the warehouse for $ 150,000 cash with Sawyer Bank. The mortgage requires monthly payments of $6,000. The interest rate on the note is 11% and accrues monthly. The first payment is due on January 1, 2017.
31	Recorded interest accrued on the Sawyer Bank note.
31	Recorded interest accrued on the Naples Bank note.
2017
Jan. 1	Paid Sawyer Bank monthly mortgage payment.
Feb. 1	Paid Sawyer Bank monthly mortgage payment.
Mar. 1	Paid Sawyer Bank monthly mortgage payment.
1	Paid first installment on note due to Naples Bank.

Requirements

1. Journalize the transactions in the Smith Pharmacies general journal. Round all answers to the nearest dollar. Explanations are not required.

2. Prepare the liabilities section of the balance sheet for Smith Pharmacies on March 1, 2017 after all the journal entries are recorded.