Question

Crane Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2022, Crane had the following transactions related to notes payable. Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 7% and is due December 1. (Crane uses a perpetual inventory system.) Sept. 30 Recorded accrued interest for the Pippen note. Oct. 1 Issued a $18,000. 10%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1. Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note. Nov. 1 Issued a $30.000 note and paid $8,300 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 8% and matures in 12 months. Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note. Dec. 1 Paid principal and interest on the Pippen note. Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.

Answer 1

Journal Entries:

Date	Account title and explanation	Debit	Credit
Sept.1	Inventory	14,400
	Notes payable		14,400
	[Issued notes for inventory]
Sept.30	Interest expense [14,400 x 7% x (1/12)]	84
	Interest payable		84
	[To record Accrued interest expense]
Oct.1	Equipment	18,000
	Notes payable		18,000
	[Issued notes for climbing wall]
Oct.31	Interest expense [18,000 x 10% x (1/12)] + 84	234
	Interest payable		234
	[To record accured interest expense]
Nov.1	Vehicle	38,300
	Cash		8,300
	Notes payable		30,000
	[To record purchase of verhicle ]
Nov.30	Interest expense [30,000 x 8% x (1/12)]+234	434
	Interest payable		434
	[To record accrued interest expense]
Dec.1	Notes payable	14,400
	Interest payable [$84 x 3 months]	252
	Cash		14,652
Dec.31	Interest expense [150+200]	350
	Interest payable		350
	[To record accrued interest expense]

T-Accounts:

Notes Payable
12/1	14,400	9/1	14,400
		10/1	18,000
		11/1	30,000
		12/31 Bal.	48,000
Interest Expense
9/30	84
10/31	234
11/30	434
12/31	350
12/31 Bal.	1102
Interest payable
12/1	252	9/30	84
		10/31	234
		11/30	434
		12/31	350
		12/31 Bal.	850

Balance sheet:

CRANE CORPORATION
Balance Sheet (Partial)
For the Year Ended December 31,2022
Current liabilities:
Interest payable	850
Notes payable	48,000

Interest expense incurred during the Year is $1,102