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., $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
24
25
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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

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)