Reference no: EM132995369

Question - Below are selected transactions of Hurricanes Ltd. for 2020, which uses a perpetual inventory system:

1. On June 1, the company purchased equipment for $ 280,000 from Panthers Ltd., paying $ 60,000 in cash and giving a one-year, 6% note for the balance.

2. On September 30, the company borrowed $ 165,000 from the ICIC Bank by signing a one-year, zero-interest-bearing note for $ 178,200. The discount rate was 8%.

Required -

a) Prepare the journal entries necessary to record these transactions using appropriate dates.

b) Prepare the adjusting entries necessary on December 31, 2020, to properly report interest expenses related to the above transactions.

With proper title and classification, show a partial Statement of Financial Position indicating how the above transactions should be reported as of December 31, 2020.