Question

The following items were selected from among the transactions completed by Made Rite Products Co. during the current year:
Feb. 15. Purchased merchandise on account from Ranier Co., $30,000, terms n/30.
Mar. 17. Issued a 30-day, 5% note for $30,000 to Ranier Co., on account.
Apr. 16. Paid Ranier Co. the amount owed on the note of March 17.
July 15. Borrowed $40,000 from Security Bank, issuing a 90-day, 6% note.
25. Purchased tools by issuing a $45,000, 120-day note to Sun Supply Co., which discounted the note at the rate of 7%.
Oct. 13. Paid Security Bank the interest due on the note of July 15 and renewed the loan by issuing a new 30-day, 9% note for $40,000. (Journalize both the debit and credit to the notes payable account.)
Nov. 12. Paid Security Bank the amount due on the note of October 13.
22. Paid Sun Supply Co. the amount due on the note of July 25.
Dec. 1. Purchased office equipment from Valley Equipment Co. for $80,000, paying $20,000 and issuing a series of ten 8% notes for $6,000 each, coming due at 30-day intervals.
17. Settled a product liability lawsuit with a customer for $41,000, payable in January. Made Rite accrued the loss in a litigation claims payable account.
31. Paid the amount due Valley Equipment 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, $15,680;
(b) Interest on the nine remaining notes owed to Valley Equipment Co.



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  • CreatedNovember 08, 2012
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