Question

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

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., $360,000, terms n/30.
31 Issued a 30-day, 5% note for $360,000 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 $210,000, 60-day note to Zegna Co., which discounted the note at the rate of 7%.
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 $500,000, paying $120,000 and issuing a series of ten 6% notes for $38,000 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.
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, $27,500.
B. Interest on the nine remaining notes owed to Taylor Co. Assume a 360-day year.

CHART OF ACCOUNTSPioneer 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 Common Stock
311 Retained Earnings
312 Dividends
313 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

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.

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

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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, $27,500.
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

Homework Answers

Answer #1

Requirement 1

Date Particulars Debit Credit
01-Mar Marchandise inventory $3,60,000
To Accounts Payable Galston Co. $3,60,000
(Being inventiry purchased)
31-Mar Accounts Payable Galston Co. $3,60,000
To Note payable $3,60,000
(Being note payable issued to Galston Co)
30-Apr Note Payable $3,60,000
Interest Expense $1,500
To Bank $3,61,500
(Being note payable paid)
01-Jun Bank $1,80,000
To Note payable $1,80,000
(Being money borrowed from pilati bank)
01-Jul Tools $2,10,000
To Note payable $2,10,000
(Being tools purchased)
16-Jul Note Payable $1,80,000
Interest Expense $900
To Note payable $1,80,000
To Bank $900
(Being Interest paid)
15-Aug Note Payable $1,80,000
Interest Expense $975
To Bank $1,80,975
(Being Note paid)
30-Aug Note Payable $2,10,000
To Bank $2,10,000
(Being paid to zegna co.)
01-Dec Office equipment $5,00,000
To Bank $1,20,000
To Note payable $3,80,000
(Being office equipment purchased)
22-Dec Litigation loss $3,10,000
To Litogation claims payable $3,10,000
(Being settlement of product liability lawsuit)
31-Dec Note Payable $38,000
Interest Expense $190
To Bank $38,000
(Being note paid)

Requirement 2

31-Dec product warranty expense $27,500
to product warranty payable $27,500
(Being provision for product warranty made)
31-Dec Interest Expense $1,710
To Interest payable $1,710
(Being provision for acrrued interest made)
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