Flounder Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Flounder had the following transactions related to notes payable. Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued a $21,600, 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 $26,400 note and paid $8,900 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 7% 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.
a) Prepare journal entries for the transactions noted above.
b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.
c) Show the balance sheet presentation of notes payable and interest payable at December 31
d) How much interest expense relating to notes payable did Flounder incur during the year?
interest expense incurred during the year: $ ?

a) Prepare journal entries for the transactions noted above.

Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)

Dr Inventory 14,400

    Cr Notes payable 14,400

Sept. 30 Recorded accrued interest for the Pippen note.

Dr Interest expense 96

    Cr Interest payable 96

Oct. 1 Issued a $21,600, 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.

Dr Cash 21,600

    Cr Notes payable 21,600

Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.

Dr Interest expense 240

    Cr Interest payable 240

Nov. 1 Issued a $26,400 note and paid $8,900 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 7% and matures in 12 months.

Dr Vehicle 35,300

    Cr Notes payable 26,400

    Cr Cash 8,900

Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.

Dr Interest expense 394

    Cr Interest payable 394

Dec. 1 Paid principal and interest on the Pippen note.

Dr Notes payable 14,400

Dr Interest payable 288

    Cr Cash 14,688

Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.

Dr Interest expense 298

    Cr Interest payable 298

b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.

    notes payable                                           interest payable

debit               credit                                  debit               credit

                       14,400                                                       96

                       21,600                                                       240

                       26,400                                                      394

14,400                                                       288

                       48,000                                                     298

                                                                                         740                  

  interest expense                                          

debit               credit      

96

240

394

298                            

1,028

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

notes payable balance December 31 = $48,000

interest payable balance December 31 = $740

d) How much interest expense relating to notes payable did Flounder incur during the year?

$1,028

answer; ///blank(1) 75%; blank(2) 40%;