Problem 10-2A The following are selected transactions of Blanco Company. Blanco

Question

Problem 10-2A

The following are selected transactions of Blanco Company. Blanco prepares financial statements quarterly.

Jan.

2

Purchased merchandise on account from Nunez Company, $19,200, terms 2/10, n/30. (Blanco uses the perpetual inventory system.)

Feb.

1

Issued a 9%, 2-month, $19,200 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 $12,900 in cash and signing a 10%, 3-month, $51,600 note.

Sept.

30

Accrued interest for 3 months on Marson note.

Oct.

1

Paid face value and interest on Marson note.

Dec.

1

Borrowed $32,400 from the Paola Bank by issuing a 3-month, 8% note with a face value of $32,400.

Dec.

31

Recognized interest expense for 1 month on Paola Bank note.

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Prepare journal entries for the listed transactions and events. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit

Apr. 1

Oct. 1

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Post to the accounts Notes Payable, Interest Payable, and Interest Expense. (Post entries in the order of journal entries presented in the previous part.)

Notes Payable

Interest Payable

Interest Expense

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

Blanco Company
Balance Sheet (Partial)

$

$

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What is total interest expense for the year?

Total interest

$

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Explanation / Answer

GENERAL JOURNAL Date Account title & Explanation Debit Credit Jan2 Inventory $19,200 Accounts payable $19,200 (To record purchase of inventory on account) Feb1 Accounts payable $19,200 Notes payable $19,200 (To record issue of 9%notes of $192000) March31 Interest expense $           288 (0.09*19200*(2/12) Interest payable $288 (To record accrued interest on notes payable) April 1 Notes payable $19,200 Interest payable $288 Cash $19,488 (To record payament of principle and interest on notes) July1 Equipment $64,500 Notes payable $51,600 Cash $12,900 (To record purchase of equipment) Sep30 Interest expense $        1,290 (51600*0.1*(3/12) Interest payable $    1,290 (To record accrued interest on notes payable) Oct1 Notes payable $51,600 Interest payable $1,290 Cash $52,890 (To record payament of principle and interest on notes) Dec1 Cash $32,400 Notes payable $32,400 (To record borrowing fromPaola Bank) Dec31 Interest expense $           216 (32400*0.08*(1/12) Interest payable $        216 (To record accrued interest on notes payable) NOTES PAYABLE Date Account Debit Credit .Feb1 Accounts payable $19,200 April 1 Cash $19,200 .July1 Equipment $51,600 .Oct1 Cash $51,600 .Dec1 Cash $32,400 INTEREST PAYABLE Date Account Debit Credit .March31 Interest expense $288 .April 1 Cash $288 .Sep30 Interest expense $1,290 .Oct1 Cash $1,290 .Dec31 Interest expense $216 INTEREST EXPENSE Date Account Debit Credit .March31 Interest payable $288 .Sep30 Interest payable $1,290 .Dec31 Interest payable $216 TOTAL INTEREST EXPENSE $1,794 Balance sheet (partial)As on December 31 Notes Payable $32,400 Interest Payable $216

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