The following selected transactions of Johnson Motors Company were completed during the current accounting year ended December 31.

1. March 1, borrowed $55,000 on a two-year, 12% interest-bearing note. Interest is paid annually.

2. April 1, borrowed cash and signed a $44,000, two-year, noninterest-bearing note. The market rate for this level of risk was 12%.

3. June 1, purchased a truck with a list price of $72,600. Paid $6,600 cash and signed a $66,000, one-year, noninterest-bearing note. The market rate for this level of risk was 12%.

4. During the year, sold merchandise for $66,000 cash that carried a two-year warranty for parts and labor. A reasonable estimate of the cost of the warranty is 1.5% of sales revenue. By December 31, actual warranty costs amounted to $550.

5. June 1, Johnson cosigned and guaranteed payment of a $110,000, 14%, one-year note owed by a local supplier to City Bank. The bank required a cosignature; but Johnson believes that default by the debtor is only reasonably possible.

6. Property taxes for the year are recorded monthly.
• Prior-year property taxes were $4,591 and were expected to increase by 15% during the year.
• December 10 final tax assessment received was $5,500 and was paid on February 1 of the following year.
7. In December a $44,000 cash dividends was declared (not yet paid or issued).
8. For the month of December, sales revenue (excluding sales taxes collected) was $880,000. Sales tax is 5%, applicable to 98% of the sales. No unpaid sales tax
carried over from November.
9. On December 31, interest has accrued on outstanding notes.

Provide the entries.

Answer rating: 100% (QA)

1 March 1 Cash Debit 55000 Notes Payable Credit 55000 To record the borrowing of 55000 on a twoyear ... View the full answer