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

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

Feb. 3. Purchased merchandise on account from Onifade Co., $410,000, terms n/30.
Mar. 3. Issued a 45-day, 6% note for $410,000 to Onifade Co., on account.
Apr. 17. Paid Onifade Co. the amount owed on the note of March 3.
June 1. Borrowed $250,000 from Aldhiezer Bank, issuing a 60-day, 7.5% note.
July 21. Purchased tools by issuing a $300,000, 60-day note to Nash Co., which discounted the note at the rate of 8%.
31. Paid Aldhiezer Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 9% note for $250,000. (Journalize both the debit and credit to the notes payable account.)
Aug. 30. Paid Aldhiezer Bank the amount due on the note of July 31.
Sept.19. Paid Nash Co. the amount due on the note of July 21.
Dec. 1. Purchased office equipment from Oso Co. for $340,000, paying $40,000 and issuing a series of ten 8% notes for $30,000 each, coming due at 30-day intervals.
12. Settled a product liability lawsuit with a customer for $165,000, payable in January. Warwick accrued the loss in a litigation claims payable account.
31. Paid the amount due Oso Co. on the first note in the series issued on December 1.

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, $32,500.
b. Interest on the nine remaining notes owed to Oso Co.


Answer:
































1. Feb. 3 Merchandise Inventory 410,000
Accounts Payable—Onifade Co. 410,000
Mar. 3 Accounts Payable—Onifade Co. 410,000
Notes Payable 410,000
Apr. 17 Notes Payable 410,000
Interest Expense ($410,000 × 45/360 × 6%) 3,075
Cash 413,075
June 1 Cash 250,000
Notes Payable 250,000
July 21 Tools 296,000
Interest Expense ($300,000 × 60/360 × 8%) 4,000
Notes Payable 300,000
31 Notes Payable 250,000
Interest Expense ($250,000 × 60/360 × 7.5%) 3,125
Notes Payable 250,000
Cash 3,125
Aug. 30 Notes Payable 250,000
Interest Expense ($250,000 × 30/360 × 9%) 1,875
Cash 251,875
Sept. 19 Notes Payable 300,000

Cash 300,000
Dec. 1 Office Equipment 340,000
Notes Payable 300,000
Cash 40,000
12 Litigation Loss 165,000
Litigation Claims Payable 165,000
31 Notes Payable 30,000
Interest Expense ($30,000 × 30/360 × 8%) 200
Cash 30,200

2. a. Product Warranty Expense 32,500
Product Warranty Payable 32,500
Warranty expense for the current year.
b. Interest Expense 1,800
Interest Payable 1,800
Interest on notes, $30,000 × 8.0% × 30/360 × 9.