Question

The following items were selected from among the transactions completed by Pioneer Co. during the current year:

Mar.	1	Purchased merchandise on account from Galston Co., $414,000, terms n/30.
	31	Issued a 30-day, 4% note for $414,000 to Galston Co., on account.
Apr.	30	Paid Galston Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $180,000 from Pilati Bank, issuing a 45-day, 4% note.
Jul.	1	Purchased tools by issuing a $228,000, 60-day note to Zegna Co., which discounted the note at the rate of 6%.
	16	Paid Pilati Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6.5% note for $180,000. (Journalize both the debit and credit to the notes payable account.)
Aug.	15	Paid Pilati Bank the amount due on the note of July 16.
	30	Paid Zegna Co. the amount due on the note of July 1.
Dec.	1	Purchased office equipment from Taylor Co. for $520,000, paying $90,000 and issuing a series of ten 4% notes for $43,000 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $315,000, payable in January. Pioneer accrued the loss in a litigation claims payable account.
	31	Paid the amount due Taylor Co. on the first note in the series issued on December 1.

	Required:
1.	Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar.
2.	Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles): A. Product warranty cost, $26,500. B. Interest on the nine remaining notes owed to Taylor Co. Assume a 360-day year.

Chart of Accounts

CHART OF ACCOUNTS
Pioneer Co.
General Ledger
ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Merchandise Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment 127 Tools 128 Accumulated Depreciation-Tools LIABILITIES 210 Accounts Payable-Galston Co. 211 Accounts Payable-Taylor Co. 212 Accounts Payable-Zegna Co. 213 Interest Payable 214 Notes Payable 215 Salaries Payable 216 Social Security Tax Payable 217 Medicare Tax Payable 218 Employees Federal Income Tax Payable 219 Employees State Income Tax Payable 220 Group Insurance Payable 221 Bond Deductions Payable 224 Federal Unemployment Tax Payable 225 State Unemployment Tax Payable 226 Vacation Pay Payable 227 Unfunded Pension Liability 228 Product Warranty Payable 229 Litigation Claims Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 524 Depreciation Expense-Building 525 Delivery Expense 526 Repairs Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Depreciation Expense-Tools 534 Insurance Expense 535 Supplies Expense 536 Payroll Tax Expense 537 Vacation Pay Expense 538 Pension Expense 539 Cash Short and Over 540 Product Warranty Expense 541 Miscellaneous Expense 710 Interest Expense 720 Litigation Loss

Answer 1

1	Journal Entries
Mar. 1	Merchandise Inventory	Dr.	414000
	Accounts Payable-Galston Co.	Cr.		414000
Mar. 31	Accounts Payable-Galston Co.	Dr.	414000
	Notes Payable	Cr.		414000
Apr.-30	Notes Payable	Dr.	414000
	Interest Expense	Dr.	1380
	Cash	Cr.		415380
W. No.	Interest for 30 days
	Notes amount	414000
	Rate of interest	4%
	No. of days	30 days
	Interest=	414000*4%*30/360
		1380
Jun.-1	Cash	Dr.	180000
	Notes Payables	Cr.		180000
Jul.-1	Tools	Dr.	228000
	Notes Payables	Cr.		228000
Jul.-16	Interest Expense	Dr.	900
	Notes Payables	Dr.	180000
	Notes Payables	Cr.		180000
	Cash	Cr.		900
W. No.	Interest for 45 days
	Notes amount	180000
	Rate of interest	4%
	No. of days	45 days
	Interest=	180000*4%*45/360
		900
Aug.-15	Notes Payable	Dr.	180000
	Interest Expense	Dr.	975
	Cash	Cr.		180975
W. No.	Interest for 30 days
	Notes amount	180000
	Rate of interest	6.5%
	No. of days	30 days
	Interest=	180000*6.5%*30/360
		975
Aug.-30	Notes Payable	Dr.	228000
	Interest Expense	Dr.	2280
	Cash	Cr.		228000
W. No.	Interest for 60 days
	Notes amount	228000
	Rate of interest	6%
	No. of days	60 days
	Interest=	228000*6%*60/360
		2280
Dec.-1	Office Equipment	Dr.	520000
	Cash	Cr.		90000
	Notes Payable	Cr.		430000
Dec.-22	Litigation Loss	Dr.	315000
	Litigation Claims Payable	Cr.		315000
Dec.-31	Notes Payable	Dr.	43000
	Interest Expense	Dr.	143
	Cash	Cr.		43143
W. No.	Interest for 30 days
	Notes amount	43000
	Rate of interest	4.0%
	No. of days	30 days
	Interest=	43000*4%*30/360
		143
2
A.
Dec.-31	Product Warranty Expense	Dr.	26500
	Product Warranty Payable	Cr.		26500
B.
Dec.-31	Interest Expense	Dr.	7740
	Interest Payable	Cr.		7740
W. No.
Calculation of Interest
Note No.	Days of Maturity	Note Amount	Rate of Interest	Interest Amount
2	60	43000	4.00%	287
3	90	43000	4.00%	430
4	120	43000	4.00%	573
5	150	43000	4.00%	717
6	180	43000	4.00%	860
7	210	43000	4.00%	1003
8	240	43000	4.00%	1147
9	270	43000	4.00%	1290
10	300	43000	4.00%	1433
				7740