Question

Sunland Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During...

Sunland Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2022, Sunland 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. (Sunland uses a perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued a $19,200, 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 $24,000 note and paid $9,200 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.


Prepare journal entries for the transactions noted above.

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Answer #1
(a)
Date Account Titles
Sept. 1 Inventory $        15,600.00
        Notes Payable $            15,600.00
Sept.30 Interest Expense ($15,600 X .09 X 1/12) $             117.00
         Interest Payable $                 117.00
Oct. 1 Equipment $        19,200.00
         Notes Payable $            19,200.00
Oct. 31 Interest Expense [($19200 X .10 X 1/12)= 160 + $117] $             277.00
              Interest Payable $                 277.00
Nov. 1 Equipment $        33,200.00
           Notes Payable $            24,000.00
            Cash $              9,200.00
Nov. 30 Interest Expense   [($24000 X .08 X 1/12) = 160 + 160 + 117 $             437.00
              Interest Payable $                 437.00
Dec. 1 Notes Payable $        15,600.00
Interest Payable $             351.00
                      Cash $            15,951.00
Dec.31 Interest Expense ($160 + $160) 320
                     Interest payable

320

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