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., $390,000, terms n/30. 31 Issued a 30-day, 10% note for $390,000 to Galston Co., on account. Apr. 30 Paid Galston Co. the amount owed on the note of March 31. Jun. 1 Borrowed $156,000 from Pilati Bank, issuing a 45-day, 8% note. Jul. 1 Purchased tools by issuing a $216,000, 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 $156,000. (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 $500,000, paying $150,000 and issuing a series of ten 8% notes for $35,000 each, coming due at 30-day intervals. 22 Settled a product liability lawsuit with a customer for $310,000, 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, $25,500. B. Interest on the nine remaining notes owed to Taylor Co. Assume a 360-day year.

1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Scroll down to access page 12 of the journal. Round your answers to the nearest dollar.

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

PAGE 11

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29

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, $25,500. B. Interest on the nine remaining notes owed to Taylor Co. Assume a 360-day year.

PAGE 12

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5

Answer 1

SOLUTION

A. Journal Entries-

Date	Accounts title and Explanation	Debit ($)	Credit ($)
Mar.1	Merchandise Inventory	390,000
	Accounts Payable-Galston Co.		390,000
Mar.31	Accounts Payable-Galston Co	390,000
	Notes Payable		390,000
Apr.30	Notes Payable	390,000
	Interest Expense ($390,000*10%*30/360)	3,250
	Cash		393,250
June 1	Cash	156,000
	Notes Payable		156,000
July1	Tools	213,840
	Interest Expense ($216,000*60/360*6%)	2,160
	Notes Payable		216,000
July 16	Notes Payable	156,000
	Interest Expense ($156,000*45/360*8%)	1,560
	Notes Payable		156,000
	Cash		1,560
Aug.15	Notes Payable	156,000
	Interest Expense ($156,000*30/360*6.5%)	845
	Cash		156,845
Aug.30	Notes Payable	216,000
	Cash		216,000
Dec.1	Office Equipment	500,000
	Notes Payable		350,000
	Cash		150,000
Dec.22	Litigation loss	310,000
	Litigation Claims Payable		310,000
Dec.31	Notes Payable	35,000
	Interest Expense (350,000*30/360*8%)	2,333
	Cash		37,333

B.

S.No.	Accounts title and Explanation	Debit ($)	Credit ($)
1.	Product Warranty expense	25,500
	Product Warranty Payable		25,500
2.	Interest Expense	2,100
	Interest Expense payable ($35,000*9*30/360*8%)		2,100