Warren Plastic, LLC complete these transactions in year 1 and year 2. Give gener
ID: 2352498 • Letter: W
Question
Warren Plastic, LLC complete these transactions in year 1 and year 2. Give general journal entries for them.
date yr
2/17 1 Purchased equipment for 47,000, signed a 3 month note, 9.25%.
2/28 1 Recorded the month's sales of 205,000, one-third cash, two-third's credit.
Sales tax rate is 5.1%
3/20 1 Sent Feb. sales tax to the state.
5/17 1 paid off the note dated 2-17-yr 1
5/31 1 Borrowed $185,000 on a long-term note, 7.65% note payable
Annual interest is to be paid each year on 5-30, starting yr. 2.
9/30 1 bought inventory at a cost of 26,300. Signed a 5 month 5.5% note.
12/31 1 Accrued warranty expense, estimated at 1.75% of 625,000 of sales
12/31 1 Accrued Interest on ALL outstanding notes.
2/28 2 Paid off the inventory note at maturity, including interest.
5/30 2 Paid the annual interest on the 185,000 note.
Explanation / Answer
2/17 1
Debit Equipment $47,000
Credit Notes Payable (Short-term) $47,000
2/28 1
Debit Cash $71,818.33 =($205,000 x 1/3) + ($68,333.33 x 5.1%)
Debit Accounts Receivable $143,636.67 =($205,000 x 2/3) + ($136,666.67 x 5.1%)
Credit Sales $205,000
Credit Sales Tax Payable $10,455= ($68,333.33 x 5.1%+ $136,666.67 x 5.1%)
3/20 1
Debit Sales Tax Payable $10,455
Credit Cash $10,455
5/17 1
Debit Notes Payable (Short-term) $47,000
Debit Interest Expense $898.875=($47,000 x 7.65% x 3/12)
Credit Cash $47,898.875
5/31 1
Cash $185,000
Notes Payable (Long-term) $185,000
9/30 1
Debit Raw Materials Inventory $26,300
Credit Notes Payable (Short-term) $26,300
12/31 1
Debit Warranty Expense $10,937.5 = ($625,000 x 1.75%)
Credit Warranty Liability $10,937.5
12/31 1
Debit Interest Expense $9,555.54
Credit Interest Payable $9,555.54 =($185,000 x 7.65% x 8/12) + ($26300 x 5.5% x 1/12)
2/28 2
Debit Interest Payable $33.85
Debit Interest Expense $1157.75 ($126,300x 5.5% x 2/12)
Debit Notes Payable (Short-term) $126,300
Credit Cash $12,601.56
5/30 2
Debit Interest Payable $11,900
Debit Interest Expense $4717.5 ($185,000 x 7.65% x 4/12)
Debit Notes Payable (Long-term) $185,000
Credit Cash $272,850
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