Question

Liability Transactions

The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:

Apr. 15.

Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount.

May 1.

Purchased equipment by issuing a $320,000, 180-day note to Spyder Manufacturing Co., which discounted the note at the rate of 6%.

15.

Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% note for $225,000. (Record both the debit and credit to the notes payable account.)

July 14.

Paid Audi Company the amount due on the note of May 15.

Aug. 16.

Purchased merchandise on account from Exige Co., $90,000, terms, n/30.

Sept. 15.

Issued a 45-day, 6% note for $90,000 to Exige Co., on account.

Oct. 28.

Paid Spyder Manufacturing Co. the amount due on the note of May 1.

30.

Paid Exige Co. the amount owed on the note of September 15.

Nov. 16.

Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Dec. 16.

Paid the amount due Gallardo Co. on the first note in the series issued on November 16.

28.

Required:

For a compound transaction, accounts should be listed largest to smallest.

1. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Assume a 360-day year.

Date	Account	Debit	Credit
Apr. 15	Cash
	Notes Payable
May 1	Equipment
	Interest Expense
	Notes Payable
May 15	Notes Payable
	Interest Expense
	Notes Payable
	Cash
July 14	Notes Payable
	Interest Expense
	Cash
Aug. 16	Inventory
	Accounts Payable - Exige Co.
Sept. 15	Accounts Payable - Exige Co.
	Notes Payable
Oct. 28	Notes Payable
	Cash
Oct. 30	Notes Payable
	Interest Expense
	Cash
Nov. 16	Store Equipment
	Notes Payable
	Cash
Dec. 16	Notes Payable
	Interest Expense
	Cash
Dec. 28	Litigation Loss
	Litigation Claims Payable

2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, $26,800.
b. Interest on the 19 remaining notes owed to Gallardo Co.

Item	Account	Debit	Credit
a.	Product Warranty Expense
	Product Warranty Payable
b.	Interest Expense
	Interest Payable		Can you please break this down in simplest form.

Settled a personal injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account.

Answer 1