Question

The following transactions occurred: Purchased furniture at a cost of $7,000 on Feb. 1, signing a six month 8% note payable 1 for that amount. 2 Recorded a week's sales of S68,000 on Feb. 14. three fourths on credit and one-fourth for cash. Sales are subject to 7 % sales tax 3 Accrued monthly warranty expense, which is estimated at 2% of sales of $200,000, Feb. 28. Sent last week's sales tax to the state, Feb. 19. 4 5 Sold 1 year service contracts on copiers for $60,000 on Feb. 28. Each month the company services the copiers. Give the journal entry for the sale of the service copiers and any adjustment journal entry on Dec. 31. (lgnore cost to service copiers). Paid the six month note, plus interest, at maturity, Aug. 1. 6 7 Mar. 1, the company is a party to a patent infringement lawsuit of $230,000. Their attorney is certain it is remote that the company will lose the lawsuit. Mar. 15, the company is party to a lawsuit for company violations of $90,000. The company attorney advises that it is probable the company will lose this lawsuit. The attorney estimates the amount at $80,000. 8 Dec. 31, oil is spilled in the parking lot and is an environmental hazard which will need to be cleaned by a Hazmat team. It is certain this will need to be remediated. The company does not know how much it will cost. 9 Journalize the required transactions. If no journal entry is required, say "no journal entry." Cr. Dr. Date Account 1 2

Answer 1

Journal Entries

Date Particulars Debit Credit

01.02 Furniture A/c 7000

To Creditors A/c 7000 (Being furniture purchased against 8% note payable A/c)

14.02 Cash A/c 17000

Debtors A/c 51000

To Sales A/c 68000 To Sales tax payable 5100

28.02 Monthly warranty Exp. A/c 4000

To Warranty Payable 4000

19.02 Sales tax payable A/c 5100

To bank 5100

28.02 Bank A/c 60000

To sales 60000

31.12 No Journal Entry

01.08 Creditors A/c 280

To cash A/c 280

01.03 No Journal Entry

15.03 Expense A/c 80000

To liability for Violations 80000

31.12 No Journal Entry