Question

Answer 1

REQUIREMENT A                                  JOURNAL ENTRIES

 

 

Sr No	Date	Account Details and Explanation	Debit($)	Credit($)
(1)	Jan,2	Merchandise Inventory	25,000
		Accounts Payable		25,000
		(To record the merchandise purchase)
(2)	Feb,1	Accounts Payable	25,000
		Notes Payable		25,000
		(To record the issuance of 9%, 2 month notes payable against liability for the purchase of merchandise)
(3)	Mar 31,	Interest Expense ( 25,000 x 0.09 x 2/12)	375
		Interest Payable		375
		(To record the interest due on notes payable)
(4)	Apr,1	Notes Payable	25,000
		Interest Payable	375
		Cash		25,375
(5)	July,1	Equipment	61,200
		Cash		12,000
		Notes Payable		49,200
		(To record the purchase of equipment against cash and issuance of 10 %, 3 months notes of $49,200)
(6)	Sep,30	Interest Expense (49,200 x 10% x 3/12)	1,230
		Interest Payable		1,230
		(To record the interest due on notes payable)
(7)	Oct,1	Notes Payable	49,200
		Interest Payable	1,230
		Cash		50,430
		(To record the payment of Face value of notes payable and interest thereon.)
(8)	Dec,1	Cash	24,000
		Notes Payable		24,000
		(To record the borrowing from Paola Bank against the issuance of 8%, 3 months notes payable)
(9)	Dec 31,	Interest Expense (24,000 x 8% x1/12)	160
		Interest Payable		160
		(To record the accrued interest for 1 month at end of the quarter)

 

 

REQUIREMENT B             Posting of Accounts Notes Payable, Interest Expense, and Interest Payable

 

                                    Notes Payable

                                            

4) April1     $25,000 (7) Oct1     $49,200	$25,000 (2)  Feb1 $49,200 (5)  July 1 $24,000 (8)  Dec 1
	$24,000    December 31

 

Interest Expense

(3)  march 31                          $ 375             (6)   Sep 30                          $ 1230            (9)   Dec31                              $160

Interest Payable

(4) Apr 1                    $  375 (7) Oct 1                     $1,230	$375              (3)   March 31 $1,230            (6) Sep 30 $160               (9) Dec 31
	December 31       $160

 

REQUIREMENT C                   BALANCE SHEET EXTRACTS as On 31st December

 

Assets	Amount ($)	Liabilities	Amount ($)
		Current Liabilities Notes Payable           24,000 Interest Payable             160	24,160

 

Requirement D    Total Interest Expense

= 375+1,230+160 

=$1,765