2. Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following:
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1-Dec: Borrowed $10,000 from the First City Bank by signing a 3-month, 15% note payable. |
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Interest and principal are due at maturity. |
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10-Dec: Established a warranty liability for the XY-80, a new product. Sales are expected to |
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total 1,000 units during the month. Past experience with similar products indicates |
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that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only). |
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22-Dec: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30. |
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26-Dec: Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 day year for interest) |
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31-Dec: Repaired six XY-80s during the month at a total cost of $162 |
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31-Dec: Accrued three days of salaries at a total cost of $1,400. |
Instructions
a. Prepare journal entries to record the transactions.
b. Prepare adjusting entries on December 31 to record accrued interest for each of the notes payable.
