Problem 10-2A Ayayai Corporation sells rock-climbing products and also operates

Question

Problem 10-2A

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

Problem 10-2A Ayayai Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Ayayai had the following transactions related to notes payable Sept. Issued a $16,800 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1, (Ayayai uses a perpetual 1 inventory system.) Sept. Recorded accrued interest for the Pippen note 30 Oct. 1 Issued a $21,600, 9%, 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 $24,000 note and paid $9,000 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This Nov. 30 Dec. 1 Dec. 31 note bears interest of 8% and matures in 12 months. Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note. Paid principal and interest on the Pippen note Recorded accrued interest for the Prime Bank note and the vehicle note.

Explanation / Answer

Date Account titles & Explanations Debit Credit 1-Sep merchandise inventory 16,800 Notes payable -pippen 16,800 30-Sep interest expense 112 interest payable 112 (16800*8%*1/12) 1-Oct Climbing wall 21,600 notes payable-prime bank 21,600 31-Oct interest expense 274 interest payable 274 (112 +21600*9%*1/12) 1-Nov Vehicles 33,000 notes payable- 24,000 cash 9,000 30-Nov interest expense 434 interest payable 434 (112+162+24000*8%*1/12) 1-Dec notes payable 16,800 interest payable 336 cash 17,136 31-Dec interest expense 322 interest payable 322 (162+160) Notes payable 1-Dec 16,800 1-Sep 16,800 1-Oct 21,600 1-Nov 33,000 end bal 54,600 interest expense 30-Sep 112 31-Oct 274 30-Nov 434 31-Dec 322 End bal 1142 interest payable 1-Dec 336 30-Sep 112 31-Oct 274 30-Nov 434 31-Dec 322 end bal 806 Balance Sheet Current liabilities notes payable 54,600 interest payable 806 interest expense incurred during the year 1142

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