Question

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., $175,000, terms n/30.
	31	Issued a 30-day, 6% note for $175,000 to Kirkwood Co., on account.
Apr.	30	Paid Kirkwood Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $400,000 from Triple Creek Bank, issuing a 45-day, 5% note.
Jul.	1	Purchased tools by issuing a $45,000, 60-day note to Poulin Co., which discounted the note at the rate of 7%.
	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% note for $400,000. (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 $260,000, paying $40,000 cash and issuing a series of ten 9% notes for $22,000 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $50,000, 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.

	Required:
1.	Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year.
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, $80,000.   b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year. help needed please

Answer 1

Concepts and reason

Transaction: Transaction is an act of buying or selling goods or rendering any services that are reliably measured in terms of money.

Accounting: Accounting is a process of recording the transactions, classifying them in a specific manner, and then it is the process of summarizing, analyzing, and interpreting the results. It is a process of preserving the accounts.

Journal entry: Journal entry is the recording of transactions in a systematic manner as they occur. Thus, it is a summary of all the transactions that have debit and credit aspects recorded chronologically.

Fundamentals

Golden rules of Accounting:

Rules for debit and credit:

When asset increases, debit it; when asset decreases, credit it.

When liabilities increase, credit it; when liabilities decrease, debit it.

When stockholders’ equity increases, credit it; when stockholders’ equity decreases, debit it.

When the expenses and losses increase, debit them; when the expenses and losses decrease, credit them.

When incomes and gains increase, credit them; when incomes and gains decrease, debit them.

1)

Prepare journal entries to record the transaction:

2a)

Prepare journal entries to record the transaction for warranty cost.

2b)

Prepare journal entries to record the transaction for interest expenses.

Ans: Part 1

Part 2a

Part 2b