Question

6.

Journalizing Installment Notes

On the first day of the fiscal year, a company issues $45,000, 8%, six-year installment notes that have annual payments of $9,734. The first note payment consists of $3,600 of interest and $6,134 of principal repayment.

a. Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it blank.

	Cash
	Notes Payable

b. Journalize the first annual note payment. If an amount box does not require an entry, leave it blank.

	Interest Expense
	Notes Payable
	Cash

7.

Yummy sold $618,000 of consumer electronics during July under a six-month warranty. The cost to repair defects under the warranty is estimated at 7.5% of the sales price. On November 10, a customer was given $159 cash under terms of the warranty.

(a) Provide the journal entry for the estimated warranty expense on July 31 for July sales. If an amount box does not require an entry, leave it blank.

July 31	Product Warranty Expense
	Product Warranty Payable

(b) Provide the journal entry for the November 10 cash payment. If an amount box does not require an entry, leave it blank.

Nov. 10	Product Warranty Payable
	Cash

8.

Quick ratio

Adieu Company reported the following current assets and current liabilities for two recent years:

	Dec. 31, 20Y4		Dec. 31, 20Y3
Cash	$1,000		$1,140
Temporary investments	1,200		1,400
Accounts receivable	800		910
Inventory	2,200		2,600
Accounts payable	1,875		2,300

a. Compute the quick ratio on December 31 for each year. Round to one decimal place.

	20Y4		20Y3
Quick Ratio

b. Is the quick ratio improving or declining?

Improving

Answer 1

6
a
Cash	45000
Notes Payable		45000
b
Interest Expense	3600
Notes Payable	6134
Cash		9734
7
Product Warranty Expense	46350		=618000*7.5%
Product Warranty Payable		46350
Product Warranty Payable	159
Cash		159
8
a
	20Y4	20Y3
Cash	1000	1140
Temporary investments	1200	1400
Accounts receivable	800	910
Total Quick assets	3000	3450
Divide by Accounts payable	1875	2300
Quick Ratio	1.6	1.5
b
Quick ratio is improving