The following items were selected from among the transactions completed by Sherwood Co. during the current year:
Mar. | 1 | Purchased merchandise on account from Kirkwood Co., $390,000, terms n/30. |
31 | Issued a 30-day, 10% note for $390,000 to Kirkwood Co., on account. | |
Apr. | 30 | Paid Kirkwood Co. the amount owed on the note of March 31. |
Jun. | 1 | Borrowed $156,000 from Triple Creek Bank, issuing a 45-day, 8% note. |
Jul. | 1 | Purchased tools by issuing a $216,000, 60-day note to Poulin Co., which discounted the note at the rate of 6%. |
16 | Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6.5% note for $156,000. (Journalize both the debit and credit to the notes payable account.) | |
Aug. | 15 | Paid Triple Creek Bank the amount due on the note of July 16. |
30 | Paid Poulin Co. the amount due on the note of July 1. | |
Dec. | 1 | Purchased equipment from Greenwood Co. for $500,000, paying $150,000 cash and issuing a series of ten 8% notes for $35,000 each, coming due at 30-day intervals. |
22 | Settled a product liability lawsuit with a customer for $310,000, payable in January. Accrued the loss in a litigation claims payable account. | |
31 | Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. |
Required: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. | Journalize the adjusting entry for each of the following
accrued expenses at the end of the current year (refer to the Chart
of Accounts for exact wording of account titles):
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CHart of accounts
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Date | Account titles & Description | Debit | Credit | ||||
1-Mar | merchandise inventory | 390,000 | |||||
Accounts payable-Kirkwood | 390,000 | ||||||
31-Mar | Accounts payable-Kirkwood | 390,000 | |||||
Notes payable | 390,000 | ||||||
30-Apr | Notes payable | 390,000 | |||||
interest expense | (390,000*10%*30/360) | 3250 | |||||
cash | 393,250 | ||||||
1-Jun | Cash | 156,000 | |||||
notes payable | 156,000 | ||||||
1-Jul | Tools | 213,840 | |||||
interest expense | (216000*6%*60/360) | 2160 | |||||
notes payable | 216,000 | ||||||
16-Jul | 6.5% notes payable | 156,000 | |||||
interest expense | (156,000*8%*45/360) | 1560 | |||||
8% notes payable | 156,000 | ||||||
cash | 1560 | ||||||
15-Aug | notes payable | 156,000 | |||||
interest expense | 845 | ||||||
Cash | 156,845 | ||||||
30-Aug | Notes payable | 216,000 | |||||
cash | 216,000 | ||||||
1-Dec | office Equipment | 500,000 | |||||
cash | 150,000 | ||||||
notes payable | 350,000 | ||||||
22-Dec | litigation loss | 310,000 | |||||
litigation Claims payable | 310,000 | ||||||
31-Dec | notes payable | 35,000 | |||||
interest expense | 233 | ||||||
cash | 35,233 | ||||||
2) | product warranty expense | 25,500 | |||||
product warranty payable | 25,500 | ||||||
interest expense | 2100 | ||||||
interest payable | (35000*9*8%*30/360 | 2,100 | |||||
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