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.
(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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