JD Machinery & Supplies entered into the following transactions: 12/1/2014 Borro
ID: 2466302 • Letter: J
Question
JD Machinery & Supplies entered into the following transactions:
12/1/2014 Borrowed $15,000 cash from First National Bank by signing a 120 day 9% interest bearing note
12/6/2014 Sold a machine for $10,000 cash. The machine cost JD $6,000. The machine included a 2 year warranty for parts and labor.
12/31/2014 Recorded the adjusting entry for accrued interest on the note from First National.
12/31/2014 Recorded the adjusting entry for warranty expense related to the December 6 sale. JD estimates that warranty expenses will be 5% of sales.
???? Paid the amount due on the loan from First National Bank.
6/12/15 Repaired the machine sold on December 6. Cost to repair was $400 labor and $150 parts.
Required:
Determine the maturity date of the note.
Record the journal entries for the preceding transactions.
Explanation / Answer
Maturity date 1April 2015
Journal entries
Date
Description
Debit
Credit
12/1/2014
Cash
15,000
To Notes payable
15,000
12/16/2014
Cash
10,000
To Sales
10,000
Cost of goods sold
$6,000
To inventory
$6,000
12/31/2014
Interest expense
112.50
To interest payable
(15,000@9%*1/12)
112.50
12/31/2014
Warranty expense
500
To Warranty liability
(10,000@5%)
500
6/12/15
Warranty liability
500
Warranty expense
50
To cash
550
Maturity date 1April 2015
Journal entries
Date
Description
Debit
Credit
12/1/2014
Cash
15,000
To Notes payable
15,000
12/16/2014
Cash
10,000
To Sales
10,000
Cost of goods sold
$6,000
To inventory
$6,000
12/31/2014
Interest expense
112.50
To interest payable
(15,000@9%*1/12)
112.50
12/31/2014
Warranty expense
500
To Warranty liability
(10,000@5%)
500
6/12/15
Warranty liability
500
Warranty expense
50
To cash
550
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