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.)July 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.Sept. 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:For a compound transaction, accounts should be listed largest to smallest.1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. Apr. 15Cash225,000Notes Payable225,000May 1Equipment310,400Interest Expense9,600Notes Payable320,000May 15July 14Notes Payable225,000Interest Expense1,125Cash226,125Aug. 16Sept. 15Oct. 28 Oct. 30Nov. 16Dec. 16Notes PayableCashDec. 28Litigation Loss87,500Litigation Claims Payable87,5002. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:a. Product warranty cost, $26,800.b. Interest on the 19 remaining notes owed to Gallardo Co.If an amount box does not require an entry, leave it blank.ItemAccountDebitCredita.Cashb.

1. Following are the preparation of journal entries:

Answered: Apr. 15 Cash 225,000 Notes Payable…

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter10: Liabilities: Current, Installment Notes, And Contingencies

Section: Chapter Questions

Problem 10.4EX: Entries for notes payable A business issued a 120-day, 5% note for 90,000 to a creditor on account....

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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.)
July 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.
Sept. 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:

For a compound transaction, accounts should be listed largest to smallest.

1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year.

Apr. 15
Cash
225,000
Notes Payable
225,000
May 1
Equipment
310,400
Interest Expense
9,600
Notes Payable
320,000
May 15
July 14
Notes Payable
225,000
Interest Expense
1,125
Cash
226,125
Aug. 16
Sept. 15
Oct. 28

Oct. 30
Nov. 16
Dec. 16
Notes Payable
Cash
Dec. 28
Litigation Loss
87,500
Litigation Claims Payable
87,500
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, $26,800.
b. Interest on the 19 remaining notes owed to Gallardo Co.
If an amount box does not require an entry, leave it blank.
Item
Account
Debit
Credit
a.
Cash
b.

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