The following items were selected from among the transactions completed by Aston
ID: 2481754 • Letter: T
Question
The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:
Chart of Accounts
Journal
1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to access page 12 of the journal for the adjusting entries.
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JOURNAL
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PAGE 12
JOURNAL
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Adjusting Entries
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Apr. 15 Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount. May 1 Purchased equipment by issuing a $320,000, 180-day note to Spyder Manufacturing Co., which discounted the note 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% note for $225,000. (Record both the debit and credit to the notes payable account.) Jul. 14 Paid Audi Company the amount due on the note of May 15. Aug. 16 Purchased merchandise on account from Exige Co., $90,000, terms, n/30. Sep. 15 Issued a 45-day, 6% note 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 note of September 15. Nov. 16 Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes 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 injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account.Explanation / Answer
JOURNAL Date DESCRIPTION POST. REF. DEBIT CREDIT 1 Apr-15 Cash 225000 Notes Payable 6% 30 days 225000 ( amount borrowed from Audi company on 6% 30 days Note) 2 May-01 Equipment 320000 Accounts Payable-Spyder Manufacturing Co. 320000 3 Accounts Payable-Spyder Manufacturing Co. 320000 Notes Payable 6% 180 days 320000 (Equipment Purchased by 6% 180 days Note) 4 May-15 Interest Expense 1125 Cash 1125 (Interst paid on Notes payable of April 15, 6% on 225000 for 30days) 5 May-15 Notes Payable 6% 30 days 225000 Notes Payable 8% 60 days 225000 ( 6%,30 days not renewed from audi company) 6 Jul-14 Notes Payable 8% 60 days 225000 Interest Expense 3000 Cash 228000 ( Amount due on note may 15 paid to audi company) 7 Aug-16 Merchandise Inventory 90000 Accounts Payable-Exige Co. 90000 (Purchased merchandise from Exige Co., terms, n/30.) 8 Sep-15 Accounts Payable-Exige Co. 90000 Notes Payable 6% 45 days 90000 (Issued a 45-day, 6% note for $90,000 to Exige Co.) 9 Oct-28 Notes Payable 6% 180 days 320000 Interst 8000 Cash 328000 ( Amount due on note may 1, paid to Spyder company) ( Interst 5 month @6% on $320000) 10 Oct-28 Notes Payable 6% 45 days 90000 Interst 6795 Cash 96795 ( Amount due on note Sep 15, paid to Exige company) ( Interst 45 days @6% on $90000) 11 Nov-16 Store Equipment 450000 Accounts Payable-Gallardo Co. 450000 12 Nov-16 Accounts Payable-Gallardo Co. 450000 Cash 50000 Notes Payable 9% 30 days 400000 (Purchased store equipment from Gallardo Co. issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals). 13 Dec-16 Notes Payable 9% 30 days 20000 Interst 150 Cash 20150 ( Amount due on note nov 16, paid to Gallardo company) ( Interst 30 days @9% on $20000) 14 Dec-28 Litigation Loss 87500 Litigation Claims Payable 87500 (Settled a personal injury lawsuit) Adjusting Entries 1 Product Warranty Expense 26800 Product Warranty Payable 26800 ( Warnty cost recognised) 2 Interest Expense 1425 Interest Payable 1425 ( interest on 19, 9% notes for the current year recognised for 15 days= 19 X 20000X 9% /360 days X 15 dyas)
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