Question

Liability Transactions

The following items were selected from among the transactions completed by Sherwood Co. during the current year:

Feb. 15.	Purchased merchandise on account from Kirkwood Co., $144,000, terms n/30.
Mar. 17.	Issued a 60-day, 7% note for $144,000 to Kirkwood Co., on account.
May 16.	Paid Kirkwood Co. the amount owed on the note of March 17.
June 15.	Borrowed $134,400 from Triple Creek Bank, issuing a 60-day, 8% note.
July 21.	Purchased tools by issuing a $75,000, 90-day note to Poulin Co., which discounted the note at the rate of 9%.
Aug. 14.	Paid Triple Creek Bank the interest due on the note of June 15 and renewed the loan by issuing a new 60-day, 10% note for $134,400. (Journalize both the debit and credit to the notes payable account.)
Oct. 13.	Paid Triple Creek Bank the amount due on the note of August 14.
Oct. 19.	Paid Poulin Co. the amount due on the note of July 21.
Dec. 1.	Purchased office equipment from Greenwood Co. for $108,000, paying $18,000 cash and issuing a series of ten 6% notes for $9,000 each, coming due at 30-day intervals.
Dec. 12.	Settled a product liability lawsuit with a customer for $64,000, payable in January. Accrued the loss in a litigation claims payable account.
Dec. 31.	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.

Required:

1. Journalize the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year. If required, round to one decimal place. Don't round the intermediate calculations.

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

Date	Account	Debit	Credit
Feb. 15	Inventory	fill in the blank 2	fill in the blank 3
	Accounts Payable-Kirkwood Co.	fill in the blank 5	fill in the blank 6
Mar. 17	Accounts Payable-Kirkwood Co.	fill in the blank 8	fill in the blank 9
	Notes Payable	fill in the blank 11	fill in the blank 12
May 16	Notes Payable	fill in the blank 14	fill in the blank 15
	Interest Expense	fill in the blank 17	fill in the blank 18
	Cash	fill in the blank 20	fill in the blank 21
June 15	Cash	fill in the blank 23	fill in the blank 24
	Notes Payable	fill in the blank 26	fill in the blank 27
July 21	Tools	fill in the blank 29	fill in the blank 30
	Interest Expense	fill in the blank 32	fill in the blank 33
	Notes Payable	fill in the blank 35	fill in the blank 36
Aug. 14	Notes Payable	fill in the blank 38	fill in the blank 39
	Interest Expense	fill in the blank 41	fill in the blank 42
	Notes Payable	fill in the blank 44	fill in the blank 45
	Cash	fill in the blank 47	fill in the blank 48
Oct. 13	Notes Payable	fill in the blank 50	fill in the blank 51
	Interest Expense	fill in the blank 53	fill in the blank 54
	Cash	fill in the blank 56	fill in the blank 57
Oct. 19	Notes Payable	fill in the blank 59	fill in the blank 60
	Cash	fill in the blank 62	fill in the blank 63
Dec. 1	Office Equipment	fill in the blank 65	fill in the blank 66
	Notes Payable	fill in the blank 68	fill in the blank 69
	Cash	fill in the blank 71	fill in the blank 72
Dec. 12	Litigation Loss	fill in the blank 74	fill in the blank 75
	Litigation Claims Payable	fill in the blank 77	fill in the blank 78
Dec. 31	Notes Payable	fill in the blank 80	fill in the blank 81
	Interest Expense	fill in the blank 83	fill in the blank 84
	Cash	fill in the blank 86	fill in the blank 87

2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: (a) product warranty cost, $13,600; (b) interest on the nine remaining notes owed to Greenwood Co.

Item	Account	Debit	Credit
a.		fill in the blank 89	fill in the blank 90
		fill in the blank 92	fill in the blank 93
b.		fill in the blank 95	fill in the blank 96
		fill in the blank 98	fill in the blank 99

Answer 1