Question

Problem 11-02A a-d The following are selected transactions of Swifty Company, Swilly prepares financial statements quarterly Jan. 2 Purchased merchandise on account from Nunez Company, $32,000, terms 3/10, n/30. (Swifty uses the perpetual inventory system.) Feb. 1 Issued a 9%, 2-month, $32,000 note to Nunez in payment of account. Mar 31 Accrued interest for 2 months on Nunez note Apr. 1 Puld face value and interest on Nunez note. Purchased equipment from Marson Equipment paying $12,000 in cash and signing a 10%, 3-month, $60,000 note. Sept. 30 Accrued interest for 3 months on Marson note. Oct. 1 Pald face value and interest on Marson note. Dec. 1 Borrowed $19,200 from the Paola Bank by issuing a 3-month, 8% note with a face value of $19,200. Dec. 31 Recognized interest expense for 1 montin Paola Banknote. Prepare journal entries for the sted transactions and events. (Credit account titles are automatically indented when amount is entered to not indent manually. Re Journal entries in the order presented in the problem.) Date Accounts and Explanation Debit

Answer 1

Journal Entries:

Date	Account title and Explanation	Debit	Credit
Jan. 2	Inventory	$32,000
	Accounts payable		$32,000
	[To record purchase of merchandise on account]
Feb. 1	Accounts payable	$32,000
	Notes payable		$32,000
	[To record issuance of note for accounts payable]
Mar. 31	Interest expense [32,000 x 9% x 2/12]	$480
	Interest payable		$480
	[To record accrued interest expense]
Apr. 1	Notes payable	$32,000
	Interest payable	$480
	Cash		$32,480
	[To record payment of notes and interest]
July 1	Equipment	$72,000
	Cash		$12,000
	Notes payable		$60,000
	[To record purchase of equipment]
Sept.30	Interest expense [60,000 x 10% x 3/12]	$1,500
	Interest payable		$1,500
	[To record accrued interest expense]
Oct.1	Notes payable	$60,000
	Interest payable	$1,500
	Cash		$61,500
	[To record payment of note and interest]
Dec.1	Cash	$19,200
	Notes payable		$19,200
	[To record cash received in exchange of note]
Dec. 31	Interest expense [19,200 x 8% x 1/12]	$128
	Interest payable		$128
	[To record accrued interest expense]

Balance Sheet:

Balance Sheet (partial)
As at December 31
Liabilities:
Notes payable	$19,200
Interest payable	$128
		$19,328

T-Accounts:

Notes payable
Apr. 1	$32,000	Feb. 1	$32,000
Oct.1	$60,000	July 1	$60,000
		Dec.1	$19,200
		Bal.	$19,200
Interest payable
Apr. 1	$480	Mar. 31	$480
Oct.1	$1,500	Sept.30	$1,500
		Dec. 31	$128
		Bal.	$128
Interest expense
Mar. 31	$480
Sept.30	$1,500
Dec. 31	$128
Bal.	$2,108

Total interest expense for the year is $2,108