urnalize the adjusting entry for each of the following accrued expenses at the end of the current year: Product warranty cost, $80,000.
PR 10-1A Liability transactions
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. | |
| June 1 | Borrowed $400,000 from Triple Creek Bank, issuing a 45-day, 5% note. | |
| July 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. |
Instructions
- Journalize the transactions.
- Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
- Product warranty cost, $80,000.
- Interest on the nine remaining notes owed to Greenwood Co.
Osman M
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