The following items were selected from among the transactions completed by Aston Martin Inc. during the current year: Apr. 15 Borrowed $225,000 from Audi Company, issuing a 30-day 6% not for that amount.
May 1. Purchased equipment by issuing a $320,000, 180-day not to Spyder Manufacturing Co., which disconted the not at the rate of 6%.
15. Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% not for $225,000. (Record both the debit and credit to the notes payable account.)
July 14. Paid Audi Company the amount due on the note of May 15.
Aug. 16. Purchased merchandise on the account for Exige Do., $90,000, terms, n/30.
Sept. 15. Issued a 45-day, 6% not for $90,000 to Exige Co., on account.
Oct. 28. Paid Spyder Manufacturing Co. the amount due on the note of May 1.
30. Paid Exige Co. the amount owed on the not of September 15.
Nov. 16. Purchased store equipment for Gallardo Co. for $20,000 each, coming due at 30-day intervals. Dec. 16. Paid the amount due Gallardo Co. on the first note in the series issued on November 16.
28. Settled a personal injoury lawsuit with a customer for $87,500, to be paid in January. Aston Martin 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, %$26,800.
b. Interest on the 19 remaining notes owed to Gallardo Co.