Chapter 14, Problem P14AB.38APGA

Journalizing liability transactions and reporting them on the balance sheet

The following transactions of Emergency Pharmacies occurred during 2016 and 2017:

2016
Mar. 1	Borrowed $330,000 from Longwood Bank. The six-year, 13% note requires payments due annually, on March 1. Each payment consists of $55,000 principal plus one year’s interest.
Dec. 1	Mortgaged the warehouse for $600,000 cash with Sawyer Bank. The mortgage requires monthly payments of $10,000. The interest rate on the note is 6% and accrues monthly. The first payment is due on January 1, 2017.
31	Record interest accrued on the Sawyer Bank note.
31	Record interest accrued on the Longwood 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 Longwood Bank.

Requirement

1. Journalize the transaction in the Emergency Pharmacies general journal. Round all answers to the nearest dollar. Explanations are note required.
2. Prepare the liabilities section of the balance sheet for Emergency Pharmacies on March 1, 2017 after all the journal entries are recorded.