PR 10-1A Liability transactions The following items were selected from among the
ID: 2560275 • Letter: P
Question
PR 10-1A Liability transactions 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. OBJ. 1, 5 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. June 1, Borrowed $180,000 from Pilati Bank, issuing a 45-day, 4% note. July 1. Purchased tools by issuing a $210,000, 60-day note to Zegna Co., which discounted the note at the rte 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 Instructions 1. Journalize the transactions. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: a. Product warranty cost, $27,500. b. Interest on the nine remaining notes owed to Taylor Co.Explanation / Answer
ans)
1. Mar 1 Merchandise inventory 360,000
Accounts payable - Galston co. 360,000
Mar 31 Accounts payable - Galston co 360,000
Notes payable 360,000
Apr 30 Notes payable 360,000
Interest expense 1500
(360,000 X 5% X 30/360)
Cash 361500
June 1 Cash 180,000
Notes payable 180,000
July 1 Tools 207550
Interest expense(210,000 X 60/360 X 7%) 2450
Notes payable 210,000
July 16 Notes payable 180,000
Interest expense(180,000 X 45/360 X 4%) 900
Notes payable 180,000
Cash 900
Aug 15 Notes payable 180.000
Interest expense (180,000 X 30/360 X 6.5%) 975
Cash 180975
Aug 30 Notes payable 210,000
Cash 210,000
Dec1 Office equipment 500,000
Notes payable 380,000
Cash 120,000
Dec 22 Litigation loss 310,000
Litigation Claims payable 310,000
Dec 31 Notes payable 38000
Interest expense ( 380,000 X 6% X 30/360) 1900
Cash 39900
2) a) Product warranty expense 27500
Product warranty payable 27500
b) Interest expense 1710
Interest payable ( 38000 X 9 X 6% X 30/360) 1710
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