The following items were selected from among the transactions completed by Sounds and Sight Stores during the current year:

Apr. 7. Borrowed $36,000 from First Financial Company, issuing a 60-day, 8% note for that amount.

May 10. Purchased equipment by issuing a $125,000, 120-day note to Milford Equipment Co., which discounted the note at the rate of 6%.

June 6. Paid First Financial Company the interest due on the note of April 7 and renewed the loan by issuing a new 30-day, 9% note for $36,000. (Record both the debit and credit to the notes payable account.)

July 6. Paid First Financial Company the amount due on the note of June 6.

Aug. 3. Purchased merchandise on account from Hamilton Co., $15,000, terms, n/30.

Sept. 2. Issued a 60-day, 6% note for $15,000 to Hamilton Co., on account.

7. Paid Milford Equipment Co. the amount due on the note of May 10.

Nov. 1. Paid Hamilton Co. the amount owed on the note of September 2.

15. Purchased store equipment from Merchandising Systems Co. for $150,000, paying $55,500 and issuing a series of seven 8% notes for $13,500 each, coming due at 30-day intervals.

Dec. 15. Paid the amount due Merchandising Systems Co. on the first note in the series issued on November 15.

21. Settled a personal injury lawsuit with a customer for $30,000, to be paid in January.

Sounds and Sight Stores accrued the loss in a litigation claims payable account.

Instructions

1. Journalize the transactions.

2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:

a. Product warranty cost, $8,400.

b. Interest on the six remaining notes owed to Merchandising Systems Co.