The following items were selected from among the transactions completed by Sherwood Co. during the current year:Mar.1Purchased merchandise on account from Kirkwood Co., $225,000, terms n/30. 31Issued a 30-day, 8% note for $225,000 to Kirkwood Co., on account.Apr.30Paid Kirkwood Co. the amount owed on the note of March 31.Jun.1Borrowed $600,000 from Triple Creek Bank, issuing a 45-day, 6% note.Jul.1Purchased tools by issuing a $50,000, 60-day note to Poulin Co., which discounted the note at the rate of 6%. 16Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 7% note for $600,000. (Journalize both the debit and credit to the notes payable account.)Aug.15Paid Triple Creek Bank the amount due on the note of July 16. 30Paid Poulin Co. the amount due on the note of July 1.Dec.1Purchased equipment from Greenwood Co. for $280,000, paying $80,000 cash and issuing a series of ten 9% notes for $20,000 each, coming due at 30-day intervals. 22Settled a product liability lawsuit with a customer for $40,000, payable in January. Accrued the loss in a litigation claims payable account. 31Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Required:1.Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year.2.Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles): a. Product warranty cost, $65,000. b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.CHART OF ACCOUNTSSherwood Co.General Ledger ASSETS110Cash111Accounts Receivable112Interest Receivable113Notes Receivable115Inventory116Supplies118Prepaid Insurance120Land123Building124Accumulated Depreciation-Building125Office Equipment126Accumulated Depreciation-Office Equipment127Tools128Accumulated Depreciation-Tools LIABILITIES210Accounts Payable-Kirkwood Co.211Accounts Payable-Greenwood Co.212Accounts Payable-Poulin Co.213Interest Payable214Notes Payable215Salaries Payable216Social Security Tax Payable217Medicare Tax Payable218Employees Federal Income Tax Payable219Employees State Income Tax Payable220Group Insurance Payable221Bond Deductions Payable224Federal Unemployment Tax Payable225State Unemployment Tax Payable226Vacation Pay Payable227Unfunded Pension Liability228Product Warranty Payable229Litigation Claims Payable EQUITY310Common Stock311Retained Earnings312Dividends REVENUE410Sales610Interest Revenue EXPENSES510Cost of Goods Sold520Salaries Expense524Depreciation Expense-Building525Delivery Expense526Repairs Expense529Selling Expenses531Rent Expense532Depreciation Expense-Office Equipment533Depreciation Expense-Tools534Insurance Expense535Supplies Expense536Payroll Tax Expense537Vacation Pay Expense538Pension Expense539Cash Short and Over540Product Warranty Expense541Miscellaneous Expense710Interest Expense720Litigation Loss1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal.PAGE 11 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 2.Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles): a. Product warranty cost, $65,000. b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year. PAGE 12 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1 Adjusting Entries 2 3 4 5

Answered: The following items were selected from…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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

Mar.	1	Purchased merchandise on account from Kirkwood Co., $225,000, terms n/30.
	31	Issued a 30-day, 8% note for $225,000 to Kirkwood Co., on account.
Apr.	30	Paid Kirkwood Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $600,000 from Triple Creek Bank, issuing a 45-day, 6% note.
Jul.	1	Purchased tools by issuing a $50,000, 60-day note to Poulin Co., which discounted the note at the rate of 6%.
	16	Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 7% note for $600,000. (Journalize both the debit and credit to the notes payable account.)
Aug.	15	Paid Triple Creek Bank the amount due on the note of July 16.
	30	Paid Poulin Co. the amount due on the note of July 1.
Dec.	1	Purchased equipment from Greenwood Co. for $280,000, paying $80,000 cash and issuing a series of ten 9% notes for $20,000 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $40,000, payable in January. Accrued the loss in a litigation claims payable account.
	31	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.

Required:

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year.

Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles):

	a. Product warranty cost, $65,000.
	b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

CHART OF ACCOUNTSSherwood Co.General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment
127	Tools
128	Accumulated Depreciation-Tools

	LIABILITIES
210	Accounts Payable-Kirkwood Co.
211	Accounts Payable-Greenwood Co.
212	Accounts Payable-Poulin Co.
213	Interest Payable
214	Notes Payable
215	Salaries Payable
216	Social Security Tax Payable
217	Medicare Tax Payable
218	Employees Federal Income Tax Payable
219	Employees State Income Tax Payable
220	Group Insurance Payable
221	Bond Deductions Payable
224	Federal Unemployment Tax Payable
225	State Unemployment Tax Payable
226	Vacation Pay Payable
227	Unfunded Pension Liability
228	Product Warranty Payable
229	Litigation Claims Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Salaries Expense
524	Depreciation Expense-Building
525	Delivery Expense
526	Repairs Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Depreciation Expense-Tools
534	Insurance Expense
535	Supplies Expense
536	Payroll Tax Expense
537	Vacation Pay Expense
538	Pension Expense
539	Cash Short and Over
540	Product Warranty Expense
541	Miscellaneous Expense
710	Interest Expense
720	Litigation Loss

1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal.

PAGE 11

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles):

	a. Product warranty cost, $65,000.
	b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.

PAGE 12

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5

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