Instructions (Answer all of the following, this is all part of the same quesiton
ID: 2466447 • Letter: I
Question
Instructions (Answer all of the following, this is all part of the same quesiton.)
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.Explanation / Answer
1)
Date
Account/Description
Debit
Credit
Mar 1.
Merchandise Inventory
Accounts Payable Galston Co.
366,000
366,000
Mar 31.
Accounts Payable Galston Co.
Notes Payable
366,000
366,000
Apr. 30
Notes Payable
Interest Expense ($366,000 * 30/360 * 6%)
Cash
366,000
1,830
367,830
Jun. 1
Cash
Notes payable
198,000
198,000
Jul. 1
Tools
Interest expense (270,000 * 60/360 * 6%)
Notes payable
267,300
2,700
270,000
July 16
Notes Payable
Interest expenses (198,000*45/360 * 8%)
Notes payable
Cash
198,000
1,980
198,000
1,980
Aug 15.
Notes Payable
Interest Expense ($198,000 * 30/360 6.5%)
Cash
198,000
1073
199,073
Aug. 30
Notes payable
Cash
270,000
270,000
Dec. 1
Office equipment
Notes payable
Cash
400,000
292,000
Dec. 22
Litigation loss
Litigation Claims payable
320,000
320,000
Dec. 31
Notes payable
Interest expense ($29,200 * 8% * 30/360)
Cash
29,200
195
29,395
2)
Account/Description
Debit
Credit
a.
Product warranty expense
Product warranty payable
29,000
29,000
b.
Interest expense
Interest payable (29,200 * 9 * 8% * 30/360)
1752
1752
Date
Account/Description
Debit
Credit
Mar 1.
Merchandise Inventory
Accounts Payable Galston Co.
366,000
366,000
Mar 31.
Accounts Payable Galston Co.
Notes Payable
366,000
366,000
Apr. 30
Notes Payable
Interest Expense ($366,000 * 30/360 * 6%)
Cash
366,000
1,830
367,830
Jun. 1
Cash
Notes payable
198,000
198,000
Jul. 1
Tools
Interest expense (270,000 * 60/360 * 6%)
Notes payable
267,300
2,700
270,000
July 16
Notes Payable
Interest expenses (198,000*45/360 * 8%)
Notes payable
Cash
198,000
1,980
198,000
1,980
Aug 15.
Notes Payable
Interest Expense ($198,000 * 30/360 6.5%)
Cash
198,000
1073
199,073
Aug. 30
Notes payable
Cash
270,000
270,000
Dec. 1
Office equipment
Notes payable
Cash
400,000
292,000
108,000Dec. 22
Litigation loss
Litigation Claims payable
320,000
320,000
Dec. 31
Notes payable
Interest expense ($29,200 * 8% * 30/360)
Cash
29,200
195
29,395