Current liabilities: entries and disclosure.
A review of selected financial activities of Visconti’s during 20XX disclosed the following:
1-Dec Borrowed $20,000 from the First City Bank by signing a 3-month, 15% note payable.
Interest and principal are due at maturity.
10-Feb 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 2% of the units will require repair, with warranty costs averaging $27 per unit.
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 note payable due in 60 days.
31-Dec Repaired six XY-80s during the month at a total cost of $162.
31-Dec Accrued 3 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.
c. Prepare the Current Liability section of Visconti’s balance sheet as of December 31.
Assume that the Accounts Payable account totals $203,600 on this date.