Set up column headings as necessary (including a Warranty Payable column) and use the accounting equation to record the effects of each of the following transactions on the firm’s balance sheet:

1. Accrued warranties estimated at $1,200,000 on December 31, 2000. (Set up a Warranty Payable column.)

2. Paid warranty claims costing $1,300,000 in cash during 2001.

3. Borrowed $10,000,000 at 9% annual interest for 240 days on September 30, 2001. Assume 360 days in a year.

4. Sold goods costing $12,000,000 for $25,000,000 cash during 2001.

5. Accrued interest on the loan on December 31, 2001. (Set up an interest payable column in your worksheet.)

6. Management estimated that the warranties obligation at December 31, 2001

(based on past sales and warranty claims) should be $1,500,000. Why was there a negative balance in the Warranty Payable column before your adjustment?

7. Repaid the loan, plus interest at the maturity date. P-968