Question

Question 4
Sarasota Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Sarasota had the following transactions related to notes payable.

Sept. 1       Issued a $16,800 note to Pippen to purchase inventory. The 3-month note payable bears interest of 9% and is due December 1. (Sarasota uses a perpetual inventory system.)
Sept. 30       Recorded accrued interest for the Pippen note.
Oct. 1       Issued a $22,800, 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 $27,600 note and paid $8,100 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
Debit
Credit
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
Dec. 1
enter an account title for the journal entry on December 1
enter a debit amount
enter a credit amount
enter an account title for the journal entry on December 1
enter a debit amount
enter a credit amount
enter an account title for the journal entry on December 1
enter a debit amount
enter a credit amount
choose a transaction date
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount

  
Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Post entries in the order of journal entries posted in the previous part of the question.)

Notes Payable
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose the end date of the accounting period
enter a debit balance
choose the end date of the accounting period
enter a credit balance
Interest Expense
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose the end date of the accounting period
enter a debit balance
choose the end date of the accounting period
enter a credit balance
Interest Payable
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose a transaction date
enter a debit amount
choose a transaction date
enter a credit amount
choose the end date of the accounting period
enter a debit balance
choose the end date of the accounting period
enter a credit balance

  
Show the balance sheet presentation of notes payable and interest payable at December 31.

SARASOTA CORPORATION
Balance Sheet (Partial)
choose the accounting period
select an opening subsection name
enter a balance sheet item
$enter a dollar amount
enter a balance sheet item
enter a dollar amount

  
How much interest expense relating to notes payable did Sarasota incur during the year?

Interest expense incurred during the year
$enter a dollar amount

Answer 1

Journal entries

Year	Particulars	L.F	Debit	Credit
2017
Sep-01	Inventory		16,800
	9% Note Payable- Pippen			16,800
	(For note issued)
Sep-30	Interest expense (16,800*9%*1/12)		126
	Interest Payable			126
	(For interest accrued for 1 month)
Oct-01	Climbing wall		22,800
	10% Note Payable- Prime bank			22,800
	(For note issued)
Oct-31	Interest expense		316
	Interest Payable			316
	(For interest accrued for 1 month)
	16,800*9%*1/12=126
	22,800*10%*1/12=190
Nov-01	Vehicle		35,700
	Cash			8,100
	6% Note Payable			27,600
	(For note issued)
Nov-30	Interest expense		454
	Interest Payable			454
	(For interest accrued for 1 month)
	16,800*9%*1/12=126
	22,800*10%*1/12=190
	27,600*6%*1/12 = 138
Dec-01	9% Note Payable		16,800
	Interest Payable		378
	Cash			17,178
	(for paid for pippen note)
Dec-31	Interest expense		328
	Interest Payable			328
	(For interest accrued for 1 month)
	22,800*10%*1/12=190
	27,600*6%*1/12 = 138

GL accounts

Notes Payable
Particulars	Amount	Particulars	Amount
Dec-01	16,800	Sep-01	16,800
		Oct-01	22,800
		Nov-01	27,600
	16,800		67,200
		Dec-31	50,400
Interest Payable
Particulars	Amount	Particulars	Amount
Dec-01	378	Sep-30	126
		Oct-31	316
		Nov-30	454
		Dec-31	328
	378		1,224
		Dec-31	846
Interest Expense
Particulars	Amount	Particulars	Amount
Sep-30	126
Oct-31	316
Nov-30	454
Dec-31	328
	1,224
Dec-31	1,224

Balance Sheet

Indigo Corporation
Partial Balance Sheet
Current Liabilities
Notes Payable	50,400
Interest Payable	846
		51,246

Interest expense relating to notes payable did Sarasota incur during the year is:

Note	Detail	Amount	Reason
Note to Pippen	16,800*9%*3/12	378	As Note was due on Dec 1
Note to Prime Bank	22,800*10%*3/12	570	As Note is due on Feb 1 so 3 month interest is accrued
Note for purchase of vehicle	27,600*6%*2/12	276	As Note is due on Oct 31 so 2 month interest is accrued
		1,224