The following items were selected from among the transactions completed by Sherw
ID: 2569355 • Letter: T
Question
The following items were selected from among the transactions completed by Sherwood Co. during the current year:
Chart of Accounts...
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. Jun. 1 Borrowed $400,000 from Triple Creek Bank, issuing a 45-day, 5% note. Jul. 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.Explanation / Answer
Journal Entries date Accounting titles & Explanations Debit Credit 1-Mar Merchandise inventory 175,000 Accounts payable 175,000 31-Mar Accounts payable-kirkwood 175,000 Notes payable 175,000 30-Apr notes payable 175,000 interest expense (175000*6%*30/360) 875 Cash 175875 1-Jun cash 400,000 notes payable-Triple Creek Bank 400,000 1-Jul tools 44475 interest expense (45000*7%*60/360) 525 Notes payable 45,000 16-Jul 5% notes payable 400,000 interest expense (400,000*5%*45/360) 2500 Cash 2,500 6% notes payable 400,000 15-Aug interest expense (400,000*6%*30/360) 2000 notes payable 400,000 cash 402,000 30-Aug Notes payable 45,000 Cash 45,000 1-Dec Equipment 260,000 Cash 40,000 notes payable (22000*10) 220000 22-Dec litigation loss 50,000 litigation claims payable 50,000 31-Dec interest expense 165 cash (22000*9%*30/360) 165 Adjusting entries warranty expense 80,000 Warranty payable 80,000 interest expense 16500 interest payable (22000*9*30/360) 16,500
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