Reference no: EM132682457

Problem - Liability transactions - The following items were selected from among the transactions completed by Javelin, Inc., during the current year:

Mar. 1. Borrowed $80,000 from Nova Company, issuing a 30-day, 9% note for that amount.

Mar. 15. Purchased equipment by issuing a $180,000, 180-day note to Shelby Manufacturing Co., which discounted the note at the rate of 7.5%.

Mar. 31. Paid Nova Company the interest due on the note of March 1 and renewed the loan by issuing a new 60-day, 9% note for $80,000. (Record both the debit and credit to the notes payable account.)

May 30. Paid Nova Company the amount due on the note of March 31.

July 6. Purchased merchandise on account from Pacer Co., $56,000, terms, n/30.

Aug. 5. Issued a 45-day, 8% note for $56,000 to Pacer Co., on account.

Sept. 11. Paid Shelby Manufacturing Co. the amount due on the note of March 15.

Sept. 19. Paid Pacer Co. the amount owed on the note of August 5.

Nov. 16. Purchased store equipment from Gremlin Co. for $190,000, paying $40,000 and issuing a series of fifteen 6% notes for $10,000 each, coming due at 30-day intervals.

Dec. 16. Paid the amount due Gremlin Co. on the first note in the series issued on November 16.

Dec. 21. Settled a personal injury lawsuit with a customer for $55,250, to be paid in January. Javelin, 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, $13,520.

b. Interest on the 14 remaining notes owed to Gremlin Co.