Answer and Explanation:
The journal entries are shown below:
1.
On Jan 10
Inventory $240,000
To Accounts Payable - Laine Co. $240,000
(Being the inventory is purchased on account is recorded)
On Feb 9
Accounts Payable - Laine Co. $240,000
To Notes Payable $240,000
(Being the issued of the note payable on account is recorded)
On March 11
Notes Payable $240,000
Interest Expense ($240,000 × 30 ÷ 360 × 4%) $800
To Cash $240,800
(Being the amount paid is recorded)
On May 1
Cash $160,000
To Notes Payable $160,000
(Being the borrowed cash is recorded)
On June 1
Tools $178,500
Interest Expense ($180,000 × 60 days ÷ 360 days × 5%) $1,500
To Notes Payable $180,000
(Being the tools purchased is recorded)
On June 15
Notes Payable $160,000
Interest Expense ($160,000 × 45 ÷ 360 days × 5%) $1,000
To Notes Payable $160,000
To Cash $1,000
(Being the cash paid is recorded)
On July 30
Notes Payable $160,000
Interest Expense ($160,000 × 45 ÷ 360 × 7%) $1,400
To Cash $161,400
On July 30
Notes Payable $180,000
Cash $180,000
(Being the amount paid is recorded)
On Dec 1
Office Equipment $400,000
To Notes Payable $300,000
To Cash $100,000
(Being the office equipment is purchased)
On Dec 15
Litigation Loss Dr $260,000
To Litigation Claims Payable $260,000
(Being the litigation loss is recorded)
On Dec 31
Notes payable $30,000
Interest Expense ($30,0000 × 30 ÷ 360 × 5%) $125
To Cash $30,125
(Being the amount paid is recorded)
2. The journal entries are shown below:
a. Product warranty expense $23,000
To Product warranty payable $23,000
(Being the product warranty expense is recorded)
b. Interest Expense $1,125 ($30,000 × 9 months × 30 ÷ 360 × 5%)
To Interest Payable $1,125
(Being the interest expense is recorded
