Question

3. Below are two independent sets of transactions for Welcott Company: 

(a) Welcott provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end of the first month of the year, to record the accrued vacation pay. 

(b) Welcott maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Northern Trust, by the fifteenth of the month following the end of each quarter. Assuming that the pension cost is $119,600 for the quarter ended December 31, journalize entries to record (1) the accrued pension liability on December 31 and (2) the payment to the funding agent on January 15.

4. Lamar Industries warrants its products for one year. The estimated product warranty expense is 3% of sales. Sales for June were $190,000. In July, a customer received warranty repairs requiring $185 of parts and $50 of labor. 

(a) Journalize the adjusting entry required at June 30, the end of the first month of the current year, to record the estimated product warranty expense. 

(b) Journalize the entry to record the warranty work provided in July.

5. On January 1, Yeargan Company obtained a $125,000, 7-year 5% installment note from Farmers Bank. The note requires annual payments of $21,602, with the first payment occurring on the last day of the fiscal year. The first payment consists of $6,250 interest and principal repayment of $15,352 

Journalize the following entries: 

(a) Issued the installment note for cash on January 1. 

(b) Paid the first annual payment on the note.

Answer 1

in question 5 an interest accrued entry can also be passed by debiting interest account and crediting interested accrued account.

Upon payment of interest entry would be

Interest accrued account debit

And credit to cash account.