The following items were selected from among the transactions completed by Emera
ID: 2568861 • Letter: T
Question
The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year:
Required:
1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations.
For a compound transaction, accounts should be listed largest to smallest.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $14,300; (b) interest on the nine remaining notes owed to Mountain Equipment Co.
Feb. 15. Purchased merchandise on account from Hood Co., $144,000, terms n/30. Mar. 17. Issued a 60-day, 8% note for $144,000 to Hood Co., on account. May 16. Paid Hood Co. the amount owed on the note of March 17. June 15. Borrowed $172,800 from Acme Bank, issuing a 60-day, 9% note. July 21. Purchased tools by issuing a $84,000, 90-day note to Columbia Supply Co., which discounted the note at the rate of 9%. Aug. 14. Paid Acme Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $172,800. (Journalize both the debit and credit to the notes payable account.) Oct. 13. Paid Acme Bank the amount due on the note of August 14. Oct. 19. Paid Columbia Supply Co. the amount due on the note of July 21. Dec. 1. Purchased office equipment from Mountain Equipment Co. for $120,000, paying $20,000 and issuing a series of ten 6% notes for $10,000 each, coming due at 30-day intervals. Dec. 12. Settled a product liability lawsuit with a customer for $62,000, payable in January. Emerald Bay accrued the loss in a litigation claims payable account. Dec. 31. Paid the amount due Mountain Equipment Co. on the first note in the series issued on December 1.Explanation / Answer
Journal Entries Date Accounting titles & Explanations Debit Credit 15-Feb Merchandise inventory 144,000 Accounts payable - Hood Co. 144,000 17-Mar Accounts payable-hood co. 144,000 notes payable - 144,000 16-May notes payable 144,000 interest expense(144000*8%*60/360) 1920 cash 145,920 15-Jun Cash 172,800 notes payable -Acme 172,800 21-Jul tools 82,110 discount on note(84000*9%*90/360) 1890 notes payable 84,000 14-Aug notes payable-9% 172,800 interest expense (172800*9%*60/360) 2592 interest payable 2,592 notes payable -10% 172,800 13-Oct notes payable 172,800 interest expense(172800*10%*60/360) 2880 cash 175,680 19-Oct notes payable 84,000 cash 84,000 1-Dec office equipment 120,000 cash 20,000 notes payable (10,000*10) 100,000 12-Dec litigation loss 62,000 litigation claims payable 62,000 31-Dec notes payable 10,000 interest expense(100,000*6%*30/360) 500 cash 10,500 Adjusting entries Warranty expense 14,300 Warranty payable 14,300 interest expense 450 interest pyabale (10,000*9*6%*30/360) 450
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