Question

Blossom Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2022, Blossom had the following transactions related to notes payable.
Sept. 1 Issued a $13,200 note to Pippen to purchase inventory. The 3-month note
payable bears interest of 6% and is due December 1. (Blossom uses a
perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued an $18,000, 8%, 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 $7,500 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.
Required:
Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.

Answer 1

Answer:

JOURNAL ENTRY;

Sept 1: Inventory 13200

To Notes Payable-Pippen 13200

(3 months Notes payable issued to Pippen for inventory purchase at 6%)

Sept 30 Interest Expense 66

To Interest Payable 66

(Interest recorded 13200*0.06*1/12)

Oct 1 Purchase 18000

To Notes Payable-Prime Bank 18000

(4 months Notes payable issued to Prime Bank for purchase of a new climbing wall at 8%)

Oct 31 Interest Expense 186.3

To Interest Payable 186.3

(Interest recorded (13200+66)*6%*1/12 + 18000*8%*1/12)

Nov 1 Vehicle 31500

To Notes Payable 24000

To Cash 7500

(12 months Notes payable issued for purchase of a new vehicle at 6%)

Nov 30 Interest Expense 307.46

To Interest Payable 307.46

(Interest recorded (13200+66+66.33)*6%*1/12 + (18000+120)*8%*1/12+ (24000*6%*1/12))

Dec 1 Notes Payable -Pippen 13200

Interest Payable 199

To Cash 13399

(Being amount paid to Pippen bond)

Dec 31 Interest Expense 242.4

To Interest Payable 242.4

(Interest recorded (18000+120+120.8)*8%*1/12+ ((24000+120)*6%*1/12)

BALANCE SHEET PRESENTATION :

Current Liabilities

Borrowings(Notes Payable) 42000

(24000 + 18000)

Other Current Liabilities (Interest Payable) 603.2

(242.4 + 120 + 120.8 + 120)

Explanation:

JOURNAL ENTRY;

Sept 1: Inventory 13200

To Notes Payable-Pippen 13200

(3 months Notes payable issued to Pippen for inventory purchase at 6%)

Sept 30 Interest Expense 66

To Interest Payable 66

(Interest recorded 13200*0.06*1/12)

Oct 1 Purchase 18000

To Notes Payable-Prime Bank 18000

(4 months Notes payable issued to Prime Bank for purchase of a new climbing wall at 8%)

Oct 31 Interest Expense 186.3

To Interest Payable 186.3

(Interest recorded (13200+66)*6%*1/12 + 18000*8%*1/12)

Nov 1 Vehicle 31500

To Notes Payable 24000

To Cash 7500

(12 months Notes payable issued for purchase of a new vehicle at 6%)

Nov 30 Interest Expense 307.46

To Interest Payable 307.46

(Interest recorded (13200+66+66.33)*6%*1/12 + (18000+120)*8%*1/12+ (24000*6%*1/12))

Dec 1 Notes Payable -Pippen 13200

Interest Payable 199

To Cash 13399

(Being amount paid to Pippen bond)

Dec 31 Interest Expense 242.4

To Interest Payable 242.4

(Interest recorded (18000+120+120.8)*8%*1/12+ ((24000+120)*6%*1/12)

BALANCE SHEET PRESENTATION :

Current Liabilities

Borrowings(Notes Payable) 42000

(24000 + 18000)

Other Current Liabilities (Interest Payable) 603.2

(242.4 + 120 + 120.8 + 120)