Notes payable and accrued interest
During the fiscal year ended 31 December, Black Crows Ltd carried out the following transactions involving notes payable:
Aug. 6 Borrowed $11,200 from The Doors Ltd issuing to them a 45-day, 5% note payable.
Sep. 16 Purchased office equipment from Sofa Ltd. The invoice amount was $16,800 and Sofa Ltd agreed to accept as full payment a 5%, 3-month note for the invoice amount.
Sep. 20 Paid the note payable due to The Doors Ltd plus accrued interest.
Nov. 1 Borrowed $235,000 from Bank of Cyprus at an interest rate of 5% per annum; signed a 90-day note payable.
Dec. 1 Purchased merchandise in the amount of $3,000 from Helios Ltd. Gave in settlement a 90-day interest bearing note at 6%.
Dec. 16 The $16,900 note payable to Sofa Ltd matured. The company paid the interest accruing and issued a new 30-day 5% note to replace the maturing note.
Required:
a. Prepare journal entries to record the above transactions.
b. Prepare the adjusting entry needed at 31 December to accrue interest owed on notes payable. Assume that adjusting entries are made annually (you can use 1 entry for all 3 notes).