Question details

2. Current liabilities: entries and disclosure. A review of selected financial activities
$ 8.00

2. Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following:

 

     
 

1-Dec: Borrowed $10,000 from the First City Bank by signing a 3-month, 15% note payable.

 

Interest and principal are due at maturity.

   
 

10-Dec: Established a warranty liability for the XY-80, a new product. Sales are expected to

 

total 1,000 units during the month. Past experience with similar products indicates

 

that 3% of the units will require repair, with warranty costs averaging $27 per unit (parts only).

 

22-Dec: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.

 

26-Dec: Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days. (Assume 360 day year for interest)

 

31-Dec: Repaired six XY-80s during the month at a total cost of $162

 
 

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.

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