Current liabilities: entries and disclosure
A review of selected financial activities of Visconti's during 20XX disclosed the following:
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12/1
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Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity.
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12/10
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Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit (parts only).
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12/22
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Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.
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12/26
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Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 days for daily interest calculation)
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12/31
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Repaired six XY-80s during the month at a total cost of $162.
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12/31
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Accrued 3 days of salaries at a total cost of $1,400.
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Instructions
a. Prepare journal entries to record the transactions.
b. Prepare adjusting entries on December 31 to record accrued interest for each of the notes payable.