Question

Oriole Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2022, Oriole had the following transactions related to notes payable. Sept. 1 Issued a $15,600 note to Pippen to purchase inventory. The 3-month note payable bears interest of 9% and is due December 1. (Oriole uses a perpetual inventory system.) Sept. 30 Recorded accrued interest for the Pippen note. Oct. 1 Issued a $18,000,9%, 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 $26,400 note and paid $8,000 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 6% 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. Prepare journal entries for the transactions noted above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Credit

Answer 1

Solution:

1) Journal Entries in the books of Oriole Corporation

Date	Account Titles and Explanation	Debit	Credit
Sept.1	Inventory	$       15,600
	Notes Payable		$         15,600
	[ Being inventory purchased on notes]
Sept.30	Interest Expense (15600*9%*1/12)	$             117
	Accrued Interest Payable		$               117
	(Being accrued interest payable)
Oct.1	New Climbing Wall	$       18,000
	Notes Payable		$         18,000
	[ Being climbing wall purchased on notes]
Oct.31	Interest Expense (15600*9%*1/12+18000*9%*1/12)	$             252
	Accrued Interest Payable		$               252
	(Being accrued interest payable)
Nov.1	Vehicle	$       34,400
	Cash		$           8,000
	Notes Payable		$         26,400
	[ Being climbing wall purchased on notes]
Nov.30	Interest Expense (15600*9%*1/12+18000*9%*1/12+26400*6%*1/12)	$             384
	Accrued Interest Payable		$               384
	(Being accrued interest payable)
Dec.1	Notes Payable	$       15,600
	Accrued Interest Payable	$             351
	Cash		$         15,951
	(Being notes paid along with interest)
Dec.31	Interest Expense (18000*9%*1/12+26400*6/100*1/12)	$             267
	Accrued Interest Payable		$               267
	(Being accrued interest payable)

2) T-Accounts

Notes Payable

Notes Payable
Dec.1	$           15,600	Sept.1	$          15,600
		Oct.1	$          18,000
		Nov.1	$          26,400
		End Bal	$          44,400

Interest Payable

Accrued Interest Payable
Dec.1	$           351	Sept.30	$              117
		Oct.31	$              252
		Nov.31	$              384
		Dec.31	$              267
		End Bal	$        669.00

Interest Expense

Interest Expense
Sept.30	$                 117		$                   -
Oct.31	$                 252	-	$                   -
Nov.31	$                 384	-	$                   -
Dec.31	$                 267	-	$                   -
Total	$       1,020.00

3) Partial Balance Sheet:

ORIOLE CORPORATION
Balance Sheet (Partial)
For the year ended December 31
Current Liabilities
Notes Payable	$       44,400
Add: Accrued Interest Payable	$             669
Total	$       45,069

4) Interest Expense incurred during the year $ 1,020