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., $366,000, terms n/30. 31 Issued a 30-day, 6% note for $366,000 to Galston Co., on account. Apr. 30 Paid Galston Co. the amount owed on the note of March 31. Jun. 1 Borrowed $198,000 from Pilati Bank, issuing a 45-day, 8% note. Jul. 1 Purchased tools by issuing a $270,000, 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 $198,000. (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 $400,000, paying $108,000 and issuing a series of ten 8% notes for $29,200 each, coming due at 30-day intervals. 22 Settled a product liability lawsuit with a customer for $320,000, 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.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
1-Mar	Merchandise Inventory	$366,000
	Accounts Payable		$366,000
	( To record the Purchased merchandise on account from Galstone Co., n/30)
31-Mar	Accounts Payable A/c	$366,000
	Note payable 6%A/c		$366,000
	To record the Issue of a 30-day 6% note payable to Galstone)
30-Apr	Note payable A/c	$366,000
	Interest expense A/c	$1,830
	Cash A/c		$367,830
	($366,000 * 6% *30/360 = $1830)
	(Paid 6% note with interest to Galstone)
1-Jun	Cash A/c                                               Dr.	$198,000
	Note payable-8% A/c		$198,000
	(To record the borrowe of 45-day 8% note payable from Pilati Bank)
1-Jul	Tools A/c                                            Dr.	$267,300
	Interest Expense A/c                         Dr (270,000 * 6% * 60/360).	$2,700
	To 7% Note payable A/c		$270,000
	(To record the Issuance of a 60-day notes for purchase of tools which is discounted at 6%)
16-Jul	Interest Expense A/c                        Dr.	$1,980
	8% Note payable A/c                        Dr.	$198,000
	Cash A/c		$1,980
	To 6% Note payable A/c		$198,000
	(198,000 * 8% * 45/360 )
	(To record the payment of the the interest on previous note and renewed the note)
15-Aug	Interest Expense A/c                        Dr.	$1,073
	6% Note Payable A/c                        Dr.	$198,000
	Cash A/c		$199,073
	(198,000 * 8% * 45/360 )
	(Paid the note payable and interest to Pilati bank)
30-Aug	Note Payable A/c                       Dr.	$270,000
	Cash A/c		$270,000
	(Paid the note payable due to Zinga Co.)
1-Dec	Equipment A/c                                Dr.	$400,000
	To Cash A/c		$108,000
	8% Series Note payable A/c		$292,000
	(To record the purchase of equipment and issue of 10 series of 8% note payable)
22-Dec	Litigation claim expense A/c       Dr.	$320,000
	Litigation claim payable A/c		$320,000
	(To record the accrued the litigation claim payable)
31-Dec	Interest expense (292,000*8%*30/360)	$1,947
	Notes payable	$29,200
	Cash A/c		$31,147
	(To record the Interest expense paid on first interval)