Question

Instructions Chart of Accounts Journal Instructions 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., $372,000, terms n/30 31 30 16 Issued a 30-day, 4% note for $372,000 to Kirkwood Co., on account. Paid Kirkwood Co the amount owed on the note of March 31. Borrowed $150,000 from Triple Creek Bank, issuing a 45-day, 8% note. Purchased tools by issuing a $276,000, 60 day note to Poulin Co., which discounted the note at the rate of 6% 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 $150,000. (Journalize both the debit and credit to the notes payable account.) Paid Triple Creek Bank the amount due on the note of July 16. Paid Poulin Co the amount due on the note of July 1. Purchased equipment from Greenwood Co. for $540,000, paying $108,000 cash and issuing a series of ten 4% notes for $43,200 each, coming due at 30 day intervals Settled a product liability lawsuit with a customer for $309,500, payable in January. Accrued the loss in a litigation claims payable account. Paid the amount due to Greenwood Co on the first note in the series issued on December 1 15 30 1 22 31 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): a. Product warranty cost, $28,000 b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year

Answer 1

1	Journal
	In the books of Sherwood Co.
S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
1-Mar	Purchases A/c	Dr	372,000
	To Kirkwood Co	Cr		372,000
	(Being purchases on account)
31-Mar	Kirkwood Co	Dr	372,000
	To 4% Note Payable A/c	Cr		372,000
	(Being 6% Note issued)
30-Apr	Interest A/c	Dr	1,240
	To 4% Note Payable	Cr		1,240
	(Being interest charged for 1 month)
30-Apr	4% Note Payable A/c	Dr	373,240
	To Bank A/c	Cr		373,240
	(Being Note along with interest payable paid)
1-Jun	Bank A/c	Dr	150,000
	To 8% Note Payable	Cr		150,000
	(Being amount borrowed and note issued)
1-Jul	Tools A/c	Dr	276,000
	To Note Payable A/c (Paulin Co)	Cr		276,000
	(Being tools purchased and note issued)
16-Jul	Interest A/c	Dr	1,500
	To Bank A/c	Cr		1,500
	(Being interest paid)
16-Jul	8% Note Payable	Dr	150,000
	To 6.5% Note Payable	Cr		150,000
	(Being note issued)
15-Aug	Interest A/c	Dr	813
	To 6.5% Note Payable	Cr		813
	(Being interest charged for 1 month)
15-Aug	6.5% Note Payable A/c	Dr	150,813
	To Bank A/c	Cr		150,813
	(Being Note along with interest payable paid)
30-Aug	Note Payable A/c (Paulin Co)	Dr	276,000
	To Bank A/c	Cr		276,000
	(Being amount due to Paulin Co paid)
1-Dec	Equipment A/c	Dr	540,000
	To Bank A/c	Cr		108,000
	To 4% Notes Payable			432,000
	(Being equipment purchased against cash and note payable)
22-Dec	Loss in Litigation Claim Expense A/c	Dr	309,500
	To Litigation Claim Payable A/c	Cr		309,500
	(Being loss accrued)
31-Dec	Interest A/c	Dr	144
	To 4% Note Payable	Cr		144
	(Being interest charged for 1 month on $43,200)
31-Dec	4% Note Payable	Dr	43,344
	To Bank A/c	Cr		43,344
	(Being Note along with interest payable paid)
2	Adjusting Journal
	In the books of Sherwood Co.
S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
31-Dec	Warranty Expense A/c	Dr	28,000
	To Provision for warranty	Cr		28,000
	(Being provision for warranty created)
31-Mar	Interest A/c	Dr	1,296
	To 4% Note Payable	Cr		1,296
	(Being interest charged for 1 month on 9 notes of $43,200 each)