Question

Prepare a journal entry for each transaction.

E13-16 (LO4) (Financial Statement Impact of Liability Transactions) Presented below is a list of possible transactions. 1. Purchased inventory for $80,000 on account (assume perpetual system is used). 2. Issued an $80,000 note payable in payment on account (see item 1 above). 3. Recorded accrued interest on the note from item 2 above. 4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note. 5. Recognized 4 months' interest expense on the note from item 4 above. 6. Recorded cash sales of $75,260, which includes 6% sales tax. 7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld. 8. Recorded employer's payroll taxes. 9. Accrued accumulated vacation pay. 10. Recorded an asset retirement obligation. 11. Recorded bonuses due to employees. 12. Recorded a contingent loss on a lawsuit that the company will probably lose. 13. Accrued warranty expense. 14. Paid warranty costs that were accrued in item 13 above. 15. Recorded sales of product and related service-type warranties. 16. Paid warranty costs under contracts from item 15 above. 17. Recognized warranty revenue (see item 15 above). 18. Recorded estimated liability for premium claims outstanding.

there are no amounts provided

Answer 1

Inventory Account Debit	80000
To Supplier		80000
Supplier Account Debit	80000
To Promissory Note		80000
Interest on P note Debit	8000
To Promissory Note		8000
Bank Account Debit	100000
To Zero Interest note		100000
Interest Account Debit	8000
To XYZ Bank		8000
Cash account Debit	75260
To Sales		71000
To Sales tax payable		4260
Wages Account Debit	35000
To Cash		25000
To Outstanding wages		10000
Salary & Wages Debit	Xxxx
To Bank		Yyyy
To Income tax		Aaaa
Outstanding Leave with pay Debit	Rrrr
To Bank		Rrrr
Fixed Asset Debit	1111
To Asset Retirement Obligation		1111
Bonus Account Debit	1111
To Bonus Payable		1111
( No entry required for Contingent loss on a lawsuit – it should be disclosed in the footnote of the financial statements )
Warranty Expense Debit
To Warranty Liability
Warranty Liability Debit
To bank
X Account Debit
To Sale of Goods
To Sale of Warranty
Warranty Cost Debit
To Bank
Warranty Revenue Debit
To Profit & Loss account
( Estimated liability cannot be recorded into financial statements, it is shown as a footnote to the financial statements )