Question

Feb. 15. Purchased merchandise on account from Kirkwood Co., $144,000, terms n/30. Mar. 17. Issued a 60-day, 6% 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 $175,200 from Triple Creek Bank, issuing a 60-day, 7% note. July 21. Purchased tools by issuing a $93,000, 90-day note to Poulin Co., which discounted the note at the rate of 9%. 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 $175,200. (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 $96,000, paying $16,000 cash and issuing a series of ten 6% notes for $8,000 each, coming due at 30-day intervals. Dec. 12. Settled a product liability lawsuit with a customer for $69,000, 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.

Answer 1

Answer and Explanation:

Journal entries

Feb.15

Dr Inventory 144,000

Cr Accounts Payable-Kirkwood Co. 144,000

Dr Mar.17 Accounts Payable-Kirkwood Co. 144,000

Cr Notes Payable 144,000

Dr May 16 Notes Payable 144,000

Cr Interest Expense (144,000*6%*60/360) 1,440

Cr Cash 142,560

June 15

Dr Cash 175,200

Cr Notes Payable 175,200

July 21

Dr Tools 95,093

Cr Interest Expense (93,000*9%*90/360)2,093

Cr Notes Payable 93,000

Aug. 14

Dr Notes Payable 175,200

Dr Interest Expense (175,200*7%*60/360) 2,044

Cr Notes Payable 175,200

Cr Cash 2,044

Oct. 13

Dr Notes Payable 175,200

Dr Interest Expense (175,200*10%*60/360) 2,920

Cr Cash 178,120

Oct. 19

Dr Notes Payable 93,000

Cr Cash 93,000

Dec. 1

DrOffice Equipment 96,000

Cr Notes Payable 80,000

Cr Cash 16,000

Dec. 12

Dr Litigation Loss 69,000

Cr Litigation Claims Payable 69,000

Dec. 31

Dr Notes Payable 8,000

Dr r Interest Expense (8,000*6%*30/360) 40

Cr Cash 8,040