Date Account Titles and Explanation Debit Credit Dec. 1 Notes Payable Interest E

Question

Date

Account Titles and Explanation

Debit

Credit

Dec. 1

Notes Payable

Interest Expense

Interest Payable

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. 1 Issued a $13,200 note to Pippen to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1. (Ayayai uses a perpetual inventory system.) Sept. 30 Recorded accrued interest for the Pippen note. Oct. 1 Issued a $18,000, 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 $24,000 note and paid $7,500 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 6% 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.

Explanation / Answer

Date Accounting titles & Explanations Debit Credit 1-Sep Merchandise inventory 13,200 notes payable -pippen 13,200 30-Sep interest expense 66 interest payable 66 (13200*6%*1/12) 1-Oct Climbing wall 18,000 notes payable -prime bank 18,000 31-Oct interest expense 186 interest payable 186 (66 +18000*8%%*1/12) 1-Nov vechicle 31,500 cash 7,500 notes payable 24,000 30-Nov interest expense 306 interest payable 306 (66+120+120) 1-Dec notes payable-pippen 13,200 interest payable (66*3) 198 Cash 13,398 31-Dec interest expense 240 interest payable 240 Notes payable 1-Sep 13,200 1-Oct 18,000 1-Nov 24,000 bal 55,200 interest expense 30-Sep 66 31-Oct 186 30-Nov 306 31-Dec 240 bal 798 interest payable 1-Dec 198 30-Sep 66 31-Oct 186 30-Nov 306 31-Dec 240 bal 600 Balance sheet (partial) notes payable 55,200 interest payable 600 interest expense incurred during the year 798

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