Answer:
Blanco Company
a. Journal Entries
Jan. 2:
Debit Inventory $30,000
Credit Accounts Payable (Nunez Company) $30,000
To record the purchase of merchandise, terms 2/10, n/30.
Feb 1:
Debit Accounts Payable (Nunez Company) $30,000
Credit Notes Payable (Nunez Company) $30,000
To record the issue of 9%, 2-month note in payment of account.
March 31:
Debit Interest Expense $450
Credit Interest Payable $450
To accrue 2 months interest expense.
Apr. 1:
Debit Notes Payable (Nunez Company) $30,000
Debit Interest Payable $450
Credit Cash Account $30,450
To record the payment on notes payable.
July 1:
Debit Equipment $71,000
Credit Cash $11,000
Credit Notes Payable $60,000
To record the purchase of equipment and signing a 10% , 3-month note.
Sept. 30:
Debit Interest Expense $1,500
Credit Interest Payable (Marson Equipment) $1,500
To accrue interest expense for 3 months.
Oct. 1:
Debit Notes Payable (Marson Equipment) $60,000
Debit Interest Payable (Marson Equipment) $1,500
Credit Cash Account $61,500
To record payment on account.
Dec. 1:
Debit Cash Account $24,000
Credit Notes Payable (Paola Bank) $24,000
To record the issue of a 3-month, 8% note.
Dec. 31
Debit Interest Expense $160
Credit Interest Payable $160
To accrue interest expense for one month.
b. General Ledger for Notes Payable, Interest Payable, and Interest Expense
Notes Payable
Date Accounts Title Debit Credit
Feb. 1 Accounts Payable (Nunez Company) $30,000
Apr. 1 Cash $30,000
July 1 Equipment $60,000
Oct. 1 Cash $60,000
Dec. 1 Cash $24,000
Interest Payable
Date Accounts Title Debit Credit
Mar. 31 Interest Expense $450
Apr. 1 Cash $450
Sept 30 Interest Expense $1,500
Oct. 1 Cash $1,500
Dec. 31 Interest Expense $160
Interest Expense
Date Accounts Title Debit Credit
Mar. 31 Interest Payable $450
Sept 30 Interest Payable $1,500
Dec. 31 Interest Payable $160
Dec. 31 Income Summary $2,110
c. Balance Sheet presentation of notes and interest payable at December 31:
Current Liabilities:
Notes Payable $24,000
Interest Payable $160
d. Total interest expense for the year:
= $2,110
Explanation:
In this case, Blanco Company uses adjusting entries to accrue expenses, especially interest expense with their corresponding payables.
Journal entries are the bookkeeping entries that are recorded to maintain the record of the transactions of the firm. It records all the debit and credit transactions of the company.
The Journal entries, ledger accounts, and the balance sheet has been attached below.
The total interest expense for the year is $2,110
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