These are transactions of W Company which prepares financial statements quarterl

Question

These are transactions of W Company which prepares financial statements quarterly.

Feb 01 … Received $40,000 in Cash from YCo in exchange for a note at 9% interest for 2 mos.

Mar      31 … Accrued interest for 2 months on YCo note.

Apr         1      … Paid face value and interest on YCo note.

July 1 … Purchased equipment from K Corp paying $11,000 in cash and signing a 10%, 3-month, $40,000 note.

Sep 30 …        Accrued interest for 3 months on K Corp note.

Oct   1 … Paid face value and interest on K Corp note.

a.) Prepare journal entries for the above transactions and events.

Explanation / Answer

Feb-01 Cash 40000      Notes payable 40000 Mar-31 Interest expense 600 =40000*9%/12*2       Interest payable 600 Apr-01 Notes payable 40000 Interest payable 600       Cash 40600 Jul-01 Equipment 51000       Cash 11000      Notes payable 40000 Sep-30 Interest expense 1000 =40000*10%/12*3       Interest payable 1000 Oct-01 Notes payable 40000 Interest payable 1000       Cash 41000

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