Question

The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:

Answer 1

Question Completion:

November 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.

Answer:

Aston Martin, Inc.

Apr. 15 Debit Cash $225,000

Credit 6% Notes payable (Audi Company) $225,000

To record the amount borrowed by issuing a 30-day 6% note.

May 1. Debit Equipment $320,000

Credit 6% Notes Payable (Spyder Manufacturing Co.) $320,000

To record the purchase of equipment by issuing a $320,000, 180-day note at the rate of 6%.

May 15. Debit Interest expense $1,125

Credit Cash $1,125

To record the payment of interest on note.

May 15 Debit 6% Notes payable (Audi Company) $225,000

Credit 8% Notes payable (Audi Company) $225,000

To record the exchange of notes, by issuing a new 60-day, 8% note for $225,000

July 14 Debit 8% Notes payable (Audi Company) $225,000

Credit Interest expense $3,000

Credit Cash $228,000

To record the full settlement of note with interest.

Aug. 16. Debit Inventory $90,000

Credit Accounts payable (Exige Co.) $90,000

To record the purchase of merchandise on account, terms, n/30.

Sept. 15. Debit Accounts payable (Exige Co.) $90,000

Credit 6% Note Payable (Exige Co.) $90,000

To record the settlement of account by issuing a 45-day, 6% note to Exige Co.

Oct. 28. Debit 6% Notes Payable (Spyder Manufacturing Co.) $320,000

Debit Interest expense $9,600

Credit Cash $329,600

To record the settlement of notes with interest.

30. Debit 6% Note Payable (Exige Co.) $90,000

Debit Interest Expense $675

Credit Cash $90,675

To record the settlement of notes with interest.

November 16 Debit Store equipment $450,000

Credit 9% Note payable (Gallardo Co.) $400,000

Credit Cash $50,000

To record the issuing of a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Dec. 16. Debit 9% Note payable (Gallardo Co.) $20,000

Debit Interest expense $3,000

Credit Cash $23,000

To record the settlement of the first note with interest on all the notes.

Dec. 28. Debit Litigation Claims Loss $87,500

Credit Litigation Claims Payable $87,500

To record the litigation loss.

Explanation:

a) Data and Calculations:

Apr. 15 Cash $225,000 6% Notes payable (Audi Company) $225,000

, issuing a 30-day 6% note for that amount.

May 1. Equipment $320,000 6% Notes Payable (Spyder Manufacturing Co.) $320,000 by issuing a $320,000, 180-day note at the rate of 6%.

15. Interest expense $1,125 Cash $1,125

6% Notes payable (Audi Company) $225,000 8% Notes payable (Audi Company) $225,000

issuing a new 60-day, 8% not for $225,000

July 14. 8% Notes payable (Audi Company) $225,000 Interest expense $3,000 Cash $228,000

Aug. 16. Inventory $90,000 Accounts payable (Exige Co.) $90,000

, terms, n/30.

Sept. 15. Accounts payable (Exige Co.) $90,000 6% Note Payable (Exige Co.) $90,000 Issued a 45-day, 6% not for $90,000 to Exige Co., on account.

Oct. 28. 6% Notes Payable (Spyder Manufacturing Co.) $320,000 Interest expense $9,600 Cash $329,600

30. 6% Note Payable (Exige Co.) $90,000 Interest Expense $675 Cash $90,675

November 16 - Store equipment $450,000 9% Note payable (Gallardo Co.) $400,000 Cash $50,000

issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Dec. 16. 9% Note payable (Gallardo Co.) $20,000 Interest expense $3,000 Cash $23,000

28. Litigation Claims Loss $87,500 Litigation Claims Payable$87,500