Liability Transactions The following items were selected from among the transactions completed by Sherwood Co. during the current year: Feb. 15. Purchased merchandise on account from Kirkwood Co., $144,000, terms n/30. Mar. 17. Issued a 60-day, 7% note for $144,000 to Kirkwood Co., on account. May 16. Paid Kirkwood Co. the amount owed on the note of March 17. June 15. Borrowed $168,000 from Triple Creek Bank, issuing a 60-day, 8% note. July 21. Purchased tools by issuing a $84,000, 90-day note to Poulin Co., which discounted the note at the rate of 7%. Aug. 14. Paid Triple Creek Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $168,000. (Journalize both the debit and credit to the notes payable account.) Oct. 13. Paid Triple Creek Bank the amount due on the note of August 14. Oct. 19. Paid Poulin Co. the amount due on the note of July 21. Dec. 1. Purchased office equipment from Greenwood Co. for $144,000, paying $24,000 cash and issuing a series of ten 6% notes for $12,000 each, coming due at 30-day intervals. Dec. 12. Settled a product liability lawsuit with a customer for $75,000, payable in January. Accrued the loss in a litigation claims payable account. Dec. 31. Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Required: 1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations. For a compound transaction, accounts should be listed largest to smallest. Date Account Debit Credit Feb. 15 fill in the blank 2 fill in the blank 3 fill in the blank 5 fill in the blank 6 Mar. 17 fill in the blank 8 fill in the blank 9 fill in the blank 11 fill in the blank 12 May 16 fill in the blank 14 fill in the blank 15 fill in the blank 17 fill in the blank 18 fill in the blank 20 fill in the blank 21 June 15 fill in the blank 23 fill in the blank 24 fill in the blank 26 fill in the blank 27 July 21 fill in the blank 29 fill in the blank 30 fill in the blank 32 fill in the blank 33 fill in the blank 35 fill in the blank 36 Aug. 14 fill in the blank 38 fill in the blank 39 fill in the blank 41 fill in the blank 42 fill in the blank 44 fill in the blank 45 fill in the blank 47 fill in the blank 48 Oct. 13 fill in the blank 50 fill in the blank 51 fill in the blank 53 fill in the blank 54 fill in the blank 56 fill in the blank 57 Oct. 19 fill in the blank 59 fill in the blank 60 fill in the blank 62 fill in the blank 63 Dec. 1 fill in the blank 65 fill in the blank 66 fill in the blank 68 fill in the blank 69 fill in the blank 71 fill in the blank 72 Dec. 12 fill in the blank 74 fill in the blank 75 fill in the blank 77 fill in the blank 78 Dec. 31 fill in the blank 80 fill in the blank 81 fill in the blank 83 fill in the blank 84 fill in the blank 86 fill in the blank 87 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $17,400; (b) interest on the nine remaining notes owed to Greenwood Co

Liability Transactions The following items were selected from among the transactions completed by Sherwood Co. during the current year: Feb. 15. Purchased merchandise on account from Kirkwood Co., $144,000, terms n/30. Mar. 17. Issued a 60-day, 7% note for $144,000 to Kirkwood Co., on account. May 16. Paid Kirkwood Co. the amount owed on the note of March 17. June 15. Borrowed $168,000 from Triple Creek Bank, issuing a 60-day, 8% note. July 21. Purchased tools by issuing a $84,000, 90-day note to Poulin Co., which discounted the note at the rate of 7%. Aug. 14. Paid Triple Creek Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $168,000. (Journalize both the debit and credit to the notes payable account.) Oct. 13. Paid Triple Creek Bank the amount due on the note of August 14. Oct. 19. Paid Poulin Co. the amount due on the note of July 21. Dec. 1. Purchased office equipment from Greenwood Co. for $144,000, paying $24,000 cash and issuing a series of ten 6% notes for $12,000 each, coming due at 30-day intervals. Dec. 12. Settled a product liability lawsuit with a customer for $75,000, payable in January. Accrued the loss in a litigation claims payable account. Dec. 31. Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Required: 1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations. For a compound transaction, accounts should be listed largest to smallest. Date Account Debit Credit Feb. 15 fill in the blank 2 fill in the blank 3 fill in the blank 5 fill in the blank 6 Mar. 17 fill in the blank 8 fill in the blank 9 fill in the blank 11 fill in the blank 12 May 16 fill in the blank 14 fill in the blank 15 fill in the blank 17 fill in the blank 18 fill in the blank 20 fill in the blank 21 June 15 fill in the blank 23 fill in the blank 24 fill in the blank 26 fill in the blank 27 July 21 fill in the blank 29 fill in the blank 30 fill in the blank 32 fill in the blank 33 fill in the blank 35 fill in the blank 36 Aug. 14 fill in the blank 38 fill in the blank 39 fill in the blank 41 fill in the blank 42 fill in the blank 44 fill in the blank 45 fill in the blank 47 fill in the blank 48 Oct. 13 fill in the blank 50 fill in the blank 51 fill in the blank 53 fill in the blank 54 fill in the blank 56 fill in the blank 57 Oct. 19 fill in the blank 59 fill in the blank 60 fill in the blank 62 fill in the blank 63 Dec. 1 fill in the blank 65 fill in the blank 66 fill in the blank 68 fill in the blank 69 fill in the blank 71 fill in the blank 72 Dec. 12 fill in the blank 74 fill in the blank 75 fill in the blank 77 fill in the blank 78 Dec. 31 fill in the blank 80 fill in the blank 81 fill in the blank 83 fill in the blank 84 fill in the blank 86 fill in the blank 87 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $17,400; (b) interest on the nine remaining notes owed to Greenwood Co

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 94PSB

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Question

Liability Transactions

The following items were selected from among the transactions completed by Sherwood Co. during the current year:

Feb. 15.	Purchased merchandise on account from Kirkwood Co., $144,000, terms n/30.
Mar. 17.	Issued a 60-day, 7% note for $144,000 to Kirkwood Co., on account.
May 16.	Paid Kirkwood Co. the amount owed on the note of March 17.
June 15.	Borrowed $168,000 from Triple Creek Bank, issuing a 60-day, 8% note.
July 21.	Purchased tools by issuing a $84,000, 90-day note to Poulin Co., which discounted the note at the rate of 7%.
Aug. 14.	Paid Triple Creek Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $168,000. (Journalize both the debit and credit to the notes payable account.)
Oct. 13.	Paid Triple Creek Bank the amount due on the note of August 14.
Oct. 19.	Paid Poulin Co. the amount due on the note of July 21.
Dec. 1.	Purchased office equipment from Greenwood Co. for $144,000, paying $24,000 cash and issuing a series of ten 6% notes for $12,000 each, coming due at 30-day intervals.
Dec. 12.	Settled a product liability lawsuit with a customer for $75,000, payable in January. Accrued the loss in a litigation claims payable account.
Dec. 31.	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.

Required:

1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations.

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

Date	Debit	Credit
Feb. 15	fill in the blank 2	fill in the blank 3
	fill in the blank 5	fill in the blank 6

Mar. 17	fill in the blank 8	fill in the blank 9
	fill in the blank 11	fill in the blank 12

May 16	fill in the blank 14	fill in the blank 15
	fill in the blank 17	fill in the blank 18
	fill in the blank 20	fill in the blank 21

June 15	fill in the blank 23	fill in the blank 24
	fill in the blank 26	fill in the blank 27

July 21	fill in the blank 29	fill in the blank 30
	fill in the blank 32	fill in the blank 33
	fill in the blank 35	fill in the blank 36

Aug. 14	fill in the blank 38	fill in the blank 39
	fill in the blank 41	fill in the blank 42
	fill in the blank 44	fill in the blank 45
	fill in the blank 47	fill in the blank 48

Oct. 13	fill in the blank 50	fill in the blank 51
	fill in the blank 53	fill in the blank 54
	fill in the blank 56	fill in the blank 57

Oct. 19	fill in the blank 59	fill in the blank 60
	fill in the blank 62	fill in the blank 63

Dec. 1	fill in the blank 65	fill in the blank 66
	fill in the blank 68	fill in the blank 69
	fill in the blank 71	fill in the blank 72

Dec. 12	fill in the blank 74	fill in the blank 75
	fill in the blank 77	fill in the blank 78

Dec. 31	fill in the blank 80	fill in the blank 81
	fill in the blank 83	fill in the blank 84
	fill in the blank 86	fill in the blank 87

2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $17,400; (b) interest on the nine remaining notes owed to Greenwood Co.

Item	Debit	Credit
a.	fill in the blank 89	fill in the blank 90
	fill in the blank 92	fill in the blank 93

b.	fill in the blank 95	fill in the blank 96
	fill in the blank 98	fill in the blank 99

Feedback

Consider why the note is being issued (for cash, merchandise, other long-term assets).

Consider what type of note is being issued (discount or interest-bearing).

Consider the definition of proceeds.

When making a payment on a note what accounts would be affected? What accounts would have to decrease?

Product warranty adjustments are recorded in the same period in which the related sales are recorded.

Remember that the interest on the nine remaining notes is an accrued expense adjusting entry, which means that at least one balance sheet account and one income statement account is affected.

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