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 onDecember 1.Instructions1. Journalize the transactions.2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:a. Product warranty cost, $23,000.b. Interest on the nine remaining notes owed to Warick Co.

Question
Asked Dec 18, 2019
21 views

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.

Instructions

1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, $23,000.
b. Interest on the nine remaining notes owed to Warick Co.

check_circle

Expert Answer

Step 1
  1. Prepare journal entry (from January 10th - June 1st).
help_outline

Image Transcriptionclose

Debit Credit Post Accounts and Explanation Date Ref (S) (S) January 10 Merchandise Inventory 240,000 Accounts Payable | (To record purchase of merchandise on account) 240,000 February 9 Accounts payable 240,000 Notes Payable 240,000 |(To record the issue of 49% notes on account) March 11 Notes Payable 240,000 Interest Expense (1) 800 | 240,800 Cash (To record payment of maturity and interest for notes) May 1 Cash 160,000 | 160,000 Notes Payable | (To record borrowing from T Bank by issuing 5% note) June 1 Tools 178,500 Interest Expense (2) 1,500 Notes Payable 180,000 (To record purchase of tools by issuing 5% discounted note)

fullscreen
Step 2

Prepare journal entry (from June 15th –December 15th ).

help_outline

Image Transcriptionclose

Notes Payable June 15 160,000 Interest Expense (3) Notes Payable 1,000 160,000 1,000 Cash (To record the payment of interest for T Bank and renew the loan by issuing 796 note) Notes Payable 160,000 July 30 Interest Expense (4) 1,400 161,400 Cash |(To record payment of maturity and interest for notes) Notes Payable 180,000 July 30 180,000 Cash (To record the payment of due amount) December 1 Office Equipment 400,000 Notes Payable 300,000 100,000 Cash (To record purchase of office equipment for cash and issuing of 5% notes) December Litigation Loss 260,000 15 260,000 Litigation Claims Payable (To record the accrual of litigation claims)

fullscreen
Step 3

Prepare journal entry (December 31s...

help_outline

Image Transcriptionclose

December 30,000 Notes Payable 31 Interest Expense (5) 125 30,125 Cash (to record the paymnet of interets)

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Why are deductions from employees’ earnings classified as liabilities for the employer?

A: Payroll: The total payment that a company is required to pay to its employee for the services receiv...

question_answer

Q: When is a company justified in inventorying scrap?

A: Click to see the answer

question_answer

Q: Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plan...

A: Contingent liability:  It is a potential liability of a company that depends on a future event. It i...

question_answer

Q: What is a worksheet, and how is it used to help prepare an adjusted trial balance?

A: Work Sheet: It is a tool to prepare accounting information and reports. It is an internal document. ...

question_answer

Q: Describe a situation in which the sales value at splitoff method cannot be used but the NRV method c...

A: Relative Sales Value at Split off Method: Relative sales value at split off method allocates joint c...

question_answer

Q: Classifying balance sheet accounts For each account listed, identify the category that it would appe...

A: Current assets: Current assets are those assets owned by the company that can be convertible into ca...

question_answer

Q: On December 31, it was estimated that goodwill of $4,000,000 was impaired. In addition, a patent wit...

A: a.

question_answer

Q: Which method of accounting (cash or accrual basis) is consistent with Generally Accepted Accounting ...

A: GAAP (Generally Accepted Accounting Principles): GAAP refers to a set of rules and standards followe...

question_answer

Q: At the end of the current year, Accounts Receivable has a balance of $3,750,000, Allowance for Doubt...

A: (a) Calculate the amount of adjusting entry for uncollectible accounts.