The following items were selected from among the transactions completed by Paulson INC. during the current year.
Apr. 1. Borrowed $60,000from McCaw Company, issuing a 45-day, 6% note for that amount.
Apr 26. Purchased equipment by issuing a $160,000, 180-day note to Houston manufacturing Co., which discounted the note at the rate of 8%.
May 16. Paid McCaw Company the interest due on the note of April 1 and renewing the loan by issuing a new 30-day, 10% note for $60,000. (Record both the debit and credit to the notes payable account.)
June 15. Paid McCaw Company the amount due on the note of may 16.
Sept 3. Purchase merchandise on account from Oatley Co., $42,000, terms, n/30
Oct 3. Issued a 30-day, 9% note for $42,000, to Oatley Co. on account
Oct 23. Paid Houston manufacturing Co. the amount due on the note of april 26.
Nov 2. Paid Oatley Co. the amount owed on the note of October 3.
Nov 10. Purchased store equipment from Biden technology Co. for $200,000, paying $60,000 and issuing a series of seven 9% notes for $20,000each, coming due at 30-day intervals.
Dec. 10. Paid the amount due Biden Technology Co. on the first note in the series issued on November 10.
Dec 16. Settled a personal injury lawsuit with a customer for $42,500, to be paid in January. Paulson INC. accrued the loss in a litigation claims payable account.
Instructions
1. Journalize the transactions
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year.
a. Product warranty cost, $10,400
b. Interest on the six remaining notes owed to Biden Technology Company