Liability Lawsuit
Accounting Now!! Liability Transactions…Help!!!?
First Question Is, What Would Be The Entry For This Problem:
Dec. 1 Purchased office equipment from Valley Equipment Co. for $40,000, paying $10,000 and issuing a series of ten 6% notes for $3,000 each, coming due at 30-day intervals.
Dec. 17 Settle a product liability lawsuit with a customer for $56,000, payable in January. Silver Mountain acrrued the loss in a litigation claims payable account.
Dec. 31 Paid the amount due Valley Equipment Co. on the first note in the series issued on December 1.
Please Help!!!!
December 1:
(Dr) Equipment $40000
(Cr) Cash $10000
(Cr) Notes Payable $30000
You need not to compute the present value of annuity because the note is interest-bearing.
December 17:
(Dr) Loss in Litigation Claims $56000
(Cr) Litigation Claims Payable $56000
December 31:
(Dr) Notes Payable $3000
(Dr) Interest Expense $15
(Cr) Cash $30015
Interest Expense = $3000 x 6% x 1month/12months
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