P11-27A Journalizing liability transactions The following transactions of Plymou

Question

P11-27A Journalizing liability transactions The following transactions of Plymouth Pharmacies occurred during 2017 and 2018: 2017 Purchased computer equipment at a cost of $12,000, signing a six-month, 9% note payable for that amount. Recorded the week's sales of $63,000, three-fourths on credit and one- fourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold Sent the last week's sales tax to the state. Paid the six-month, 9% note, plus interest, at maturity. Purchased merchandise inventory for $9,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system. Accrued warranty expense, which is estimated at 4% of sales of $609,000. Accrued interest on all outstanding notes payable. Jan. 9 29 Feb. 5 Jul. 9 Aug. 31 Dec. 31 31 2018 Feb. 28 Paid the six-month 10% note, plus interest, at maturity

Explanation / Answer

Journal Entries (Amounts in $)

Date Account Titles Debit Credit Jan. 9 Computer Equipment 12,000 Short-term Notes Payable 12,000 Jan. 29 Cash ($63,000*1/4*1.06) 16,695 Accounts Receivable ($63,000*3/4*1.06) 50,085 Sales Revenue 63,000 Sales Tax Payable ($63,000*6%) 3,780 Feb. 5 Sales Tax Payable 3,780 Cash 3,780 Jul. 9 Short-term Notes Payable 12,000 Interest Expense ($12,000*9%*6/12) 540 Cash ($12,000+$540) 12,540 Aug. 31 Inventory 9,000 Short-term Notes Payable 9,000 Dec. 31 Warranty Expense ($609,000*4%) 24,360 Estimated Warranty Payable 24,360 Dec. 31 Interest Expense ($9,000*10%*4/12) 300 Interest Payable 300 Feb. 28 Short-term Notes Payable 9,000 Interest Expense ($9,000*10%*2/12) 150 Interest Payable ($9,000*10%*4/12) 300 Cash ($9,000+$300+$150) 9,450

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