Question

In: Accounting

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

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., $396,000, terms n/30.
Feb. 9. Issued a 30-day, 4% note for $396,000 to Laine Co., on account.
Mar. 11. Paid Laine Co. the amount owed on the note of February 9.
May 1. Borrowed $174,000 from Tabata Bank, issuing a 45-day, 4% note.
June 1. Purchased tools by issuing a $258,000, 60-day note to Gibala Co., which discounted the note at the rate of 7%.
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 $174,000. (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 $400,000, paying $114,000 and issuing a series of ten 4% notes for $28,600 each, coming due at 30-day intervals.
15. Settled a product liability lawsuit with a customer for 311,500, 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, $28,000.
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

1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal. Round your answers to the nearest dollar.

PAGE 11

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

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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 Warick Co. Assume a 360-day year.

PAGE 12

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

Adjusting Entries

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Solutions

Expert Solution

Solution:

In the Books of O'Donnel Co.
Date Journal Entries Debit($) Credit($)
Jan-10 Merchandise Inventory 396000
   Accounts Payable - Laine 396000
( To record purchase of merchandise on account)
Feb-09 Accounts Payable - Laine 396000
   Notes Payable 396000
(To record issue of 4% 30-day loan)
Mar-11 Notes Payable 396000
Interest Expense (396000*4%*30/360) 1320
    Cash 397320
(To record settlement of 4% 30-day Notes Payable)
May-01 Cash 174000
   Notes Payable 174000
(To record borrowing from Tabata Bank by issuing 45-day 4% loan)
Jun-01 Tools 254990
Interest Expense 3010
    Notes Payable 258000
(To record purchase of Tools by issuing 60-day discounted note)
Jun-15 Interest Expense (174000*4%*45/360) 870
Notes Payable 174000
    Cash 870
    Notes Payable 174000
(To record the interest payment 45-day 4% loan from Tabata Bank and renew the loan by issuiing 6.5% 45 day loan))
Jul-30 Notes Payable 174000
Interest Expense (174000*6.5%*45/360) 1414
    Cash 175414
(To record settlement of 6.5% 45-day Notes Payable to Tabata Bank)
Jul-30 Notes Payable 258000
     Cash 258000
(To record settlement of discounted Notes Payable)
Dec-01 Office Equipment 400000
   Cash 114000
   Notes Payable (28600*10) 286000
(To record purchase of Office equipment by paying $114000 in cash and issuing 4% notes payable)
Dec-15 Litigation Loss 311500
   Litigation Claims Payable 311500
(To record accrual of litigation claims)
Dec-31 Notes Payable 28600
Interest Expense (28600*4%*30/360) 95
    Cash 28695
(To record the settlement of the first series of 4% notes payable

PS: Kindly post multiple question in parts. The first one is done for you. Use the comment box for clarification, if any


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