Question

PLEASE USE CHARTS I PROVIDED

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., $402,000, terms n/30.
	31	Issued a 30-day, 4% note for $402,000 to Kirkwood Co., on account.
Apr.	30	Paid Kirkwood Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $186,000 from Triple Creek Bank, issuing a 45-day, 4% note.
Jul.	1	Purchased tools by issuing a $246,000, 60-day note to Poulin Co., which discounted the note at the rate of 5%.
	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 $186,000. (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 $440,000, paying $120,000 cash and issuing a series of ten 8% notes for $32,000 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $319,500, 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.

CHART OF ACCOUNTS
Sherwood Co.
General Ledger
ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment 127 Tools 128 Accumulated Depreciation-Tools LIABILITIES 210 Accounts Payable-Kirkwood Co. 211 Accounts Payable-Greenwood Co. 212 Accounts Payable-Poulin Co. 213 Interest Payable 214 Notes Payable 215 Salaries Payable 216 Social Security Tax Payable 217 Medicare Tax Payable 218 Employees Federal Income Tax Payable 219 Employees State Income Tax Payable 220 Group Insurance Payable 221 Bond Deductions Payable 224 Federal Unemployment Tax Payable 225 State Unemployment Tax Payable 226 Vacation Pay Payable 227 Unfunded Pension Liability 228 Product Warranty Payable 229 Litigation Claims Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Salaries Expense 524 Depreciation Expense-Building 525 Delivery Expense 526 Repairs Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Depreciation Expense-Tools 534 Insurance Expense 535 Supplies Expense 536 Payroll Tax Expense 537 Vacation Pay Expense 538 Pension Expense 539 Cash Short and Over 540 Product Warranty Expense 541 Miscellaneous Expense 710 Interest Expense 720 Litigation Loss

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
3
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7
8
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12
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15
16
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29

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, $29,000. B. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

PAGE 12

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5

Answer 1

Date	Account Title	Debit	Credit
1-Mar	Inventory	402,000
	Accounts payable - Kirkwood		402,000
	(Purchased merchandise on account from Kirkwood Co., n/30)
31-Mar	Accounts payable - Kirkwood	402,000
	6% Notes payable-Kirkwood		402,000
	(Issued a 30-day 6% note payable to Kirkwood)
30-Apr	6% notes payable-Kirkwood	402,000
	Interest expense	2,010
	cash		404,010
	(402,000*6%*30/360)
	(Paid 6% note with interest to Kirkwood)
1-Jun	Cash	186,000
	4% notes payable -Triple creek bank		186,000
	(Borrowed 45-day 4% note payable from Triple Creek Bank)
1-Jul	Tool	243,950
	Discount on notes payable	2,050
	5% Notes payable-poulin		246,000
	(246000 X 5% X 60/360)
	(Issued a 60-day notes for purchase of tools which is discounted at 5%)
16-Jul	4% notes payable -Triple creek bank	186,000
	Interest expense(186000*4%*45/360)	930
	6.5% notes payable-Triple creek bank		186,000
	cash		930
	(Paid the interest on previous note and renewed the note)
15-Aug	6.5% notes payable-Triple creek bank	186,000
	Interest expense(186000*6.5%*30/360)	1,008
	cash		187,008
	(Paid the note payable and interest to Triple creek bank)
30-Aug	5% Notes payable-poulin	246,000
	Interest expense	2,050
	Discount on notes payable		2,050
	Cash		246,000
	(Paid the note payable due to Poulin Co.)
1-Dec	Equipment	440,000
	Cash		120,000
	8% notes payable-Greenwood Co (32,000*10)		320,000
	(Purchase of equipment and issue of 10 series of 8% note payable)
22-Dec	litigation loss	319,500
	litigation claim payable		319,500
	(Accrued the litigation claim payable)
31-Dec	8% notes payable-Greenwood Co	32,000
	interest expense (32,000*8%*30/360)	213
	cash		32,213
	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.
Adjusting Entry
Date	Account Title	Debit	Credit
31-Dec	Warratny expense	29,000
	Warranty payable		29,000
	(Product warranty cost accounted)
31-Dec	interest expense	1,920
	interest payable		1,920
	(32000*9)*8%*30/360
	( Interest on the nine remaining notes owed to Greenwood Co)