The following items were selected from among the transactions completed by Paulson, Inc. during the current year:
Apr. 1. Borrowed $60,000 from McCaw Company, issuing a 45-day, 6% note for that amount.
26. Purchased equipment by issuing a $160,000, 180-day note to Houston Manufacturing Co., which discounted the note at the rate of 8%.
May 16. Paid McCaw Company the interest due on the note of April 1 and renewed the loan by issuing a new 30-day, 10% note for $60,000. (Record both the debit and credit to the notes payable account.)
June 15. Paid McCaw Company the amount due on the note of May 16.
Sept. 3. Purchased merchandise on account from Oatley Co., $42,000, terms, n/30.
Oct. 3. Issued a 30-day, 9% note for $42,000 to Oatley Co., on account.
23. Paid Houston Manufacturing Co. the amount due on the note of April 26.
Nov. 2. Paid Oatley Co. the amount owed on the note of October 3.
10. Purchased store equipment from Biden Technology Co. for $200,000, paying $60,000 and issuing a series of seven 9% notes for $20,000 each, coming due at 30-day intervals.
Dec. 10. Paid the amount due Biden Technology Co. on the first note in the series issued on November 10.
16. Settled a personal injury lawsuit with a customer for $42,500, to be paid in January. Paulson, Inc. accrued the loss in a litigation claims payable account.
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, $10,400.
(b) Interest on the six remaining notes owed to Biden Technology Co.