Question

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., $396,000, terms n/30. 31 Issued a 30-day, 4% note for $396,000 to Kirkwood Co., on account. Apr. 30 Paid Kirkwood Co. the amount owed on the note of March 31. Jun. 1 Borrowed $174,000 from Triple Creek Bank, issuing a 45-day, 4% note. Jul. 1 Purchased tools by issuing a $258,000, 60-day note to Poulin Co., which discounted the note at the rate of 7%. 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 $174,000. (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 $400,000, paying $114,000 cash and issuing a series of ten 4% notes for $28,600 each, coming due at 30-day intervals. 22 Settled a product liability lawsuit with a customer for $311,500, 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): a. Product warranty cost, $28,000. b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

Answer 1

Date	PARTICULARS	DEBIT	CREDIT
Mar-01	Purchase A/c	396000
	To Kirkwood Co		396000
Mar-31	Kirkwood Co	396000
	To 4% Note to Kirkwood A/c		396000
Apr-30	4% Note to Kirkwood A/c	396000
	Interest on Note	1320
	To Bank A/c		397320
Jun-01	Bank A/c	174000
	To 4% Note to Triple Creek Bank		174000
Jul-01	Tools A/c	258000
	To Poulin Co		258000
Jul-16	4% Note to Triple Creek Bank	174000
	Interest on Note	870
	To Bank A/c		870
	To 6.5% Note to Triple Creek Bank		174000
Aug-16	6.5% Note to Triple Creek Bank	174000
	Interest on Note	943
	To Bank A/c		174943
Aug-30	Poulin Co	258000
	To Bank A/c		258000
Dec-01	Equipment A/c	400000
	To Bank		114000
	To 4% Note to Greenwood Co		286000
Dec-31	4% Note to Greenwood Co	28600
	Interest on Note	95
	To Bank		28695
Dec-31	Product Warranty Cost	28000
	Interest on Notes	5130
	To Liability for Accrued Expenses		33130