In: Accounting
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 $28,600 each, coming due at 30-day intervals. |
15. | Settled a product liability lawsuit with a customer for 311,500, payable in January. O’Donnel accrued the loss in a litigation claims payable account. | |
31. | Paid the amount due Warick Co. on the first note in the series issued on December 1. |
Required: | |||||||
1. | Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar. | ||||||
2. | Journalize the adjusting entry for each of the following
accrued expenses at the end of the current year:
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Journal
1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal. Round your answers to the nearest dollar.
PAGE 11
JOURNAL
ACCOUNTING EQUATION
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2. | Journalize the adjusting entry for each of the following
accrued expenses at the end of the current year (refer to the Chart
of Accounts for exact wording of account titles):
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PAGE 12
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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Adjusting Entries |
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Solution:
In the Books of O'Donnel Co. | |||
Date | Journal Entries | Debit($) | 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 |
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