PR 101A Liability transactionsSolution Answer 1 Journal Entr

PR 10-1A Liability transactions

Solution

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Mar Merchandise Inventory    175,000.00    Accounts Payable - Kirkwood Co.    175,000.00 (To record the inventory purchased) 31-Mar Accounts Payable - Kirkwood Co.    175,000.00    Notes Payable    175,000.00 (To record the notes issued) 30-Apr Notes Payable    175,000.00 Interest Expense            875.00 $175,000 x 6% X 30/360    Cash    175,875.00 (To record the note paid) 1-Jun Cash    400,000.00    Notes Payable    400,000.00 (To record the amount borrowed) 1-Jul Tools      44,475.00 $45,000 - $525 Interest Expense            525.00 $45,000 X 7% X 60/360    Notes Payable      45,000.00 (To record the tools purchased) 16-Jul Notes Payable    400,000.00 Interest Expense        2,500.00 $400,000 X 5% X 45/360    Notes Payable    400,000.00    Cash        2,500.00 (To record the new Note issued and interest paid) 15-Aug Notes Payable    400,000.00 Interest Expense        2,000.00 $400,000 x 6% X 30/360    Cash    402,000.00 (To record the note paid) 30-Aug Notes Payable      45,000.00    Cash      45,000.00 (To record the note paid) 1-Dec Equipment    260,000.00    Cash      40,000.00    Notes Payable    220,000.00 (To record the equipment purchased) 22-Dec Litigation Loss      50,000.00    Litigation Claims Payable      50,000.00 (To record the product liablity lawsuit settled) 31-Dec Note Payable      22,000.00 Interest Expense            550.00 $22,000 X 9% X 30/360    Cash      22,550.00 (To record the note paid) Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec Product Warranty Expense      80,000.00    Product Warranty Payable      80,000.00 (To record the warranty expense) 31-Dec Interest Expense        6,050.00 $22,000 X 9% X 30/360 X 9 Nos    Interest Payable        6,050.00 (To record the interest due on Note)