The following items were selected from among the transactions completed by Aston
ID: 2469985 • Letter: T
Question
The following items were selected from among the transactions completed by Aston Martin Inc. during the current year: Apr. 15 Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount. May 1 Purchased equipment by issuing a $320,000, 180-day note to Spyder Manufacturing Co., which discounted the note at the rate of 6%. 15 Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% note for $225,000. (Record both the debit and credit to the notes payable account.) Jul. 14 Paid Audi Company the amount due on the note of May 15. Aug. 16 Purchased merchandise on account from Exige Co., $90,000, terms, n/30. Sep. 15 Issued a 45-day, 6% note for $90,000 to Exige Co., on account. Oct. 28 Paid Spyder Manufacturing Co. the amount due on the note of May 1. 30 Paid Exige Co. the amount owed on the note of September 15. Nov. 16 Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals. Dec. 16 Paid the amount due Gallardo Co. on the first note in the series issued on November 16. 28 Settled a personal injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account. Required: 1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. 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, $26,800. B. Interest on the 19 remaining notes owed to Gallardo Co. Assume a 360-day year.
Explanation / Answer
Journal entries are recorded as under:
Date Particulars L.F Amount ($) Amount ($) 20XX Apr-15 Cash 2,25,000 6% Note payable-Audi Company 2,25,000 (For 6% 30-day note issued) May-01 Equipment 3,20,000 6% Note payable-Spyder manufacturing Co 3,20,000 (For 6% 180 days bond issued) May-15 Interest expene (225000*6%*30/360) 1,125 Cash 1,125 (For interest paid) May-15 6% Note payable-Audi Company 2,25,000 8% Note payable-Audi Company 2,25,000 (For 8% 60-day note issued) Jul-14 Interest expense (225,000*8%*60/360) 3,000 8% Note payable-Audi Company 2,25,000 Cash 2,28,000 (For note rapaid with interest) Aug-16 Merchandise Inventory 90,000 Accounts payable- Exige Co. 90,000 (For goods purchased on account) Sep-15 Accounts payable- Exige Co. 90,000 6% note Payable-Exige 90,000 (For bond issued to AP 45-day 6%) Oct-28 6% Notes Payable 3,20,000 Interest expense (320,000*6%*180/360) 9,600 Cash 3,29,600 (For note due paid) Oct-30 6% Notes Payable 90,000 Interest expense (90,000*6%*45/360) 675 Cash 90,675 (For note due paid) Nov-16 Equipment 4,50,000 Cash 50,000 9% notes payable 40,00,000 (For bond issued for equipment purchased) Dec-16 9% Notes Payable 20,000 Interest expense (20000*9%*30/360) 150 Cash 20,150 ( For first due note paid) Dec-28 Personal injury damages 87,500 Litigation claims payable 87,500 (For loss settled) Dec-31 Product Warranty expense 26,800 Product Warranty Payable 26,800 (For accrued expense recorded) Dec-31 Interest Expense 2,850 Interest payable 2,850 (For accrued interest recorded) (20000*19*9%*30/360)Related Questions
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