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., $414,000, terms n/30. |
Feb. | 9. | Issued a 30-day, 4% note for $414,000 to Laine Co., on account. |
Mar. | 11. | Paid Laine Co. the amount owed on the note of February 9. |
May | 1. | Borrowed $180,000 from Tabata Bank, issuing a 45-day, 4% note. |
June | 1. | Purchased tools by issuing a $228,000, 60-day note to Gibala Co., which discounted the note at the rate of 6%. |
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 $180,000. (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 $520,000, paying $90,000 and issuing a series of ten 4% notes for $43,000 each, coming due at 30-day intervals. |
15. | Settled a product liability lawsuit with a customer for 315,000, payable in January. O’Donnel accrued the loss in a litigation claims payable account. | |
31. | Paid the amount due Warick Co. on the first note in the series issued on December 1. |
Required: | |||||||
1. | Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar. | ||||||
2. | Journalize the adjusting entry for each of the following
accrued expenses at the end of the current year:
|
Answer | |||
(A) | |||
Date | Accounts title and Explanations | Debit ($) | Credit ($) |
Jan.10 | Inventory | $ 414,000 | |
Accounts Payable-Laine Co. | $ 414,000 | ||
Feb.9 | Accounts Payable-Laine Co. | $ 414,000 | |
Notes Payable | $ 414,000 | ||
Mar-11 | Notes Payable | $ 414,000 | |
Interest Expense ($414,000*30/360*4%) | $ 1,380 | ||
Cash | $ 415,380 | ||
May-01 | Cash | $ 180,000 | |
Notes Payable | $ 180,000 | ||
Jun-01 | Tools | $ 225,720 | |
Interest Expense ($228,000*60/360*6%) | $ 2,280 | ||
Notes Payable | $ 228,000 | ||
Jun-15 | Notes Payable | $ 180,000 | |
Interest Expense ($180,000*45/360*6.5%) | $ 1,463 | ||
Notes Payable | $ 180,000 | ||
Cash | $ 1,463 | ||
Jul-30 | Notes Payable | $ 180,000 | |
Interest Expense ($180,000*45/360*6%) | $ 1,350 | ||
Cash | $ 181,350 | ||
Jul-30 | Notes Payable | $ 228,000 | |
Cash | $ 228,000 | ||
Dec.1 | Office Equipment | $ 520,000 | |
Notes Payable | $ 430,000 | ||
Cash | $ 90,000 | ||
Dec-15 | Litigation Loss | $ 315,000 | |
Litigation Claims Payable | $ 315,000 | ||
Dec.31 | Notes payable | $ 43,000 | |
Interest Expense ($43,000*30/360*4%) | $ 143 | ||
Cash | $ 43,143 | ||
(B) | |||
S.No. | Accounts title and Explanations | Debit ($) | Credit ($) |
a. | Product warranty expense | $ 26,500 | |
Product warranty payable | $ 26,500 | ||
b. | Interest Expense | $ 1,290 | |
Interest Payable ($43,000*9*30/360*4%) | $ 1,290 | ||