The following items were selected from among the transactions completed by O’Don
ID: 2585662 • Letter: T
Question
The following items were selected from among the transactions completed by O’Donnel Co. during the current year:
Jan. 10. Purchased merchandise on account from Laine Co., $240,000, terms n/30. Feb. 9. Issued a 30-day, 4% note for $240,000 to Laine Co., on account. Mar. 11. Paid Laine Co. the amount owed on the note of February 9. May 1. Borrowed $160,000 from Tabata Bank, issuing a 45-day, 5% note. June 1. Purchased tools by issuing a $180,000, 60-day note to Gibala Co., which discounted the note at the rate of 5%. 15. Paid Tabata Bank the interest due on the note of May 1 and renewed the loan by issuing a new 45-day, 7% note for $160,000. (Journalize both the debit and credit to the notes payable account.) July 30. Paid Tabata Bank the amount due on the note of June 15. 30. Paid Gibala Co. the amount due on the note of June 1. Dec. 1. Purchased office equipment from Warick Co. for $400,000, paying $100,000 and issuing a series of ten 5% notes for $30,000 each, coming due at 30-day intervals. 15. Settled a product liability lawsuit with a customer for $260,000, payable in January. O’Donnel accrued the loss in a litigation claims payable account. 31. Paid the amount due Warick Co. on the first note in the series issued on December 1.Explanation / Answer
SOLUTION
(A)
(B)
Date Accounts title and Explanations Debit ($) Credit ($) Jan.10 Inventory 240,000 Accounts Payable-Laine Co. 240,000 Feb.9 Accounts Payable-Laine Co. 240,000 Notes Payable 240,000 March11 Notes Payable 240,000 Interest Expense ($240,000*30/360*4%) 800 Cash 240,800 May 1 Cash 160,000 Notes Payable 160,000 June 1 Tools 178,500 Interest Expense ($180,000*60/360*5%) 1,500 Notes Payable 180,000 June 15 Notes Payable 160,000 Interest Expense ($160,000*45/360*5%) 1,000 Notes Payable 160,000 Cash 1,000 July 30 Notes Payable 160,000 Interest Expense ($160,000*45/360*7%) 1,00 Cash 161,400 July 30 Notes Payable 180,000 Cash 180,000 Dec.1 Office Equipment 400,000 Notes Payable 300,000 Cash 100,000 Dec15 Litigation Loss 260,000 Litigation Claims Payable 260,000 Dec.31 Notes payable 30,000 Interest Expense ($30,000*30/360*5%) 125 Cash 30,125Related Questions
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