Question

chapter 10 -19

On the first day of the fiscal year, Shiller Company borrowed $32,000 by giving a five-year, 11% installment note to Soros Bank. The note requires annual payments of $8,783, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $3,520 and principal repayment of $5,263.

Journalize the entries to record the following:

a1. Issued the installment note for cash on the first day of the fiscal year.

	Cash
	Notes Payable

a2. Paid the first annual payment on the note. If an amount box does not require an entry, leave it blank.

	Interest Expense
	Notes Payable
	Cash

Accrued Product Warranty

Harbour Company disclosed estimated product warranty payable for comparative years as follows:

	(in millions)
	Current Year		Prior Year
Current estimated product warranty payable	$12,255		$11,750
Noncurrent estimated product warranty payable	7,454		6,570
Total	$19,709		$18,320

Assume that Harbour's sales were $144,533 million in current Year and that the total paid on warranty claims during the current year was $12,634 million.

a. The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash demands on the business relative to the quick current assets and other longer-term demands .

b. Provide the journal entry for the Current Year product warranty expense. Enter your answers in millions.

	Product Warranty Expense
	Product Warranty Payable

Answer 1

1
a1
Cash	32000
Notes Payable		32000
a2
Interest Expense	3520
Notes Payable	5263
Cash		8783
2
a
The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash demands on the business relative to the quick current assets and other longer-term demands .
b
Product Warranty Expense	14023		=12634+(19709-18320)
Product Warranty Payable		14023