Question

The following items were selected from among the transactions completed by O’Donnel Co. during the current year:

Jan.	10.	Purchased merchandise on account from Laine Co., $402,000, terms n/30.
Feb.	9.	Issued a 30-day, 4% note for $402,000 to Laine Co., on account.
Mar.	11.	Paid Laine Co. the amount owed on the note of February 9.
May	1.	Borrowed $186,000 from Tabata Bank, issuing a 45-day, 4% note.
June	1.	Purchased tools by issuing a $246,000, 60-day note to Gibala Co., which discounted the note at the rate of 5%.
	15.	Paid Tabata Bank the interest due on the note of May 1 and renewed the loan by issuing a new 45-day, 6.5% note for $186,000. (Journalize both the debit and credit to the notes payable account.)
July	30.	Paid Tabata Bank the amount due on the note of June 15.
	30.	Paid Gibala Co. the amount due on the note of June 1.
Dec.	1.	Purchased office equipment from Warick Co. for $440,000, paying $120,000 and issuing a series of ten 8% notes for $32,000 each, coming due at 30-day intervals.
	15.	Settled a product liability lawsuit with a customer for 319,500, payable in January. O’Donnel accrued the loss in a litigation claims payable account.
	31.	Paid the amount due Warick 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: A. Product warranty cost, $29,000. B. Interest on the nine remaining notes owed to Warick Co. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar.

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29

Answer 1

(A)

Date	Accounts title and Explanations	Debit ($)	Credit ($)
Jan.10	Merchandise Inventory	402,000
	Accounts Payable-Laine Co.		402,000
Feb.9	Accounts Payable-Laine Co.	402,000
	Notes Payable		402,000
March11	Notes Payable	402,000
	Interest Expense (402,000*30/360*4%)	1340
	Cash		403,340
May 1	Cash	186,000
	Notes Payable		186,000
June 1	Tools	243,950
	Interest Expense (246,000*60/360*5%)	2050
	Notes Payable		246,000
June 15	Notes Payable	186,000
	Interest Expense ($186,000*45/360*4%)	930
	Notes Payable		186,000
	Cash		930
July 30	Notes Payable	186,000
	Interest Expense ($186,000*45/360*6.5%)	1511
	Cash		187511
July 30	Notes Payable	246,000
	Cash		246,000
Dec.1	Office Equipment	440,000
	Notes Payable		320,000
	Cash		120,000
Dec15	Litigation Loss	260,000
	Litigation Claims Payable		260,000
Dec.31	Notes payable	32,000
	Interest Expense ($32000*30/360*8%)	213
	Cash		32123

(B)

S.No.	Accounts title and Explanations	Debit ($)	Credit ($)
a.	Product warranty expense	29,000
	Product warranty payable		29,000
b.	Interest Expense	1,920
	Interest Payable ($32000*9*30/360*8%)		1,920