The following are selected transactions of Blanco Company. Blanco prepares finan

Question

The following are selected transactions of Blanco Company. Blanco prepares financial statementsquarterly.

A: Prepare Journal Entries for the listed transactions and events. Record entries in the order they are presented in the problem

B: Post to the accounts Notes Payable, Interest Payable, and Interest Expense

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

D: What is the total interest expense for the year?

Jan. 2 Purchased merchandise on account from Nunez Company, $26,400, terms 3/10, n/30. (Blanco uses the perpetual inventory system.) Feb. 1 Issued a 9%, 2-month, $26,400 note to Nunez in payment of account. Mar. 31 Accrued interest for 2 months on Nunez note. Apr. 1 Paid face value and interest on Nunez note. July 1 Purchased equipment from Marson Equipment paying $10,800 in cash and signing a 10%, 3-month, $60,000 note. Sept. 30 Accrued interest for 3 months on Marson note. Oct. 1 Paid face value and interest on Marson note. Dec. 1 Borrowed $31,200 from the Paola Bank by issuing a 3-month, 8% note with a face value of $31,200. Dec. 31 Recognized interest expense for 1 month on Paola Bank note.

Explanation / Answer

A) Journal Entries Date Account titles & Explanations Debit Credit 2-Jan Merchandise inventory 26,400 Accounts payable -Nunez 26,400 1-Feb Accounts payable-Nunez 26,400 Notes payable 26,400 31-Mar interest expense 396 interest payable 396 (26400*9%*2/12) 1-Apr notes payable 26,400 interest payable 396 cash 26,796 1-Jul Equipment 70,800 notes payable 60,000 Cash 10,800 30-Sep interest expense 1500 interest payable 1,500 (60,000*10%*3/12) 1-Oct notes payable 60,000 interest payable 1,500 cash 61,500 1-Dec cash 31,200 notes payable 31,200 31-Dec interest expense 208 interest payable 208 (31,200*8%*1/12) B) T- Accounts Notes payable 1-Apr 26,400 1-Feb 26,400 I oct 60,000 1-Jul 60,000 1-Dec 31,200 end bal 31,200 interest payable 1-Apr 396 31-Mar 396 1-Oct 1,500 30-Sep 1,500 31-Dec 208 End bal 208 interest expense 31-Mar 396 30-Sep 1,500 31-Dec 208 End bal 2104 c) Balance Sheet presentation current liabilities interest payable 208 short term notes payable 31,200 total current liabilities 31408 d) total interest expense for the year 2,104

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