Problem 10-2A Date Account Titles and Explanation Debit Credit Jan. 2 Feb. 1 Mar

Question

Problem 10-2A

Date

Account Titles and Explanation

Debit

Credit

Jan. 2

Feb. 1

Mar. 31

Apr. 1

July 1

Sept. 30

Oct. 1

Dec. 1

Dec. 31

SHOW LIST OF ACCOUNTS

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Notes Payable

Interest Payable

Interest Expense

Problem 10-2A

The following are selected transactions of Graves Company. Graves prepares financial statements quarterly.
Jan. 2 Purchased merchandise on account from Ally Company, $33,975, terms 3/10, n/30. (Graves uses the perpetual inventory system.) Feb. 1 Issued a 6%, 2-month, $33,975 note to Ally in payment of account. Mar. 31 Accrued interest for 2 months on Ally note. Apr. 1 Paid face value and interest on Ally note. July 1 Purchased equipment from Clark Equipment paying $13,380 in cash and signing a 7%, 3-month, $42,680 note. Sept. 30 Accrued interest for 3 months on Clark note. Oct. 1 Paid face value and interest on Clark note. Dec. 1 Borrowed $22,500 from the Jonas Bank by issuing a 3-month, 6% note with a face value of $22,500. Dec. 31 Recognized interest expense for 1 month on Jonas Bank note.

Explanation / Answer

Journal Entries Date Particulars Debit Credit 2-Jan Purchase a/c Dr. $33,975 To Creditor A/c $33,975 ( Being goods purchased from Ally Company on credit) 1-Feb Creditor A/c Dr. $33,975 To Notes payable A/c $33,975 (being a 6%, 2-month, $33,975 note issued to Ally in payment of account.) 31-Mar Interest Expense A/c Dr. $340 To interest payable A/c $340 (being ineterst accrued on issued note) 31-Mar P&L A/c Dr. $340 To Interest Expense A/c $340 (being interest expense charged to P&L ) 1-Apr Notes Payable A/c Dr. $33,975 Interest payable A/c Dr. $340 To Cash & Bank A/c $34,315 (Being face value and interest paid on Ally note.) 1-Jul Equipment A/c Dr. $56,060 To Cash & Bank A/c $13,380 To Note Payable A/c $42,680 (Being equipment purchased from Clark Equipment paying $13,380 in cash and signing a 7%, 3-month, $42,680 note.) (Note: Net entry is passed rather than first opening creditor for equipment and then netting it off by Notes payable issued to such creditor for equipment) 30-Sep Interest Expense A/c Dr. $747 To Interest payable A/c $747 (being ineterst accrued on issued note) 30-Sep P&L A/c Dr. $747 To interest expense A/c $747 (being interest expense charged to P&L ) 1-Oct Note Payable A/c Dr. $42,680 Interest payable A/c Dr. $747 To Cash & Bank A/c $43,427 (Being face value and interest paid on Clark note.) 1-Dec Cash & Bank A/c Dr. $22,500 To Note payable A/c $22,500 (Being a sum of $22,500 borrowed from the Jonas Bank by issuing a 3-month, 6% note with a face value of $22,500.) 31-Dec Interest Exense A/c Dr. $113 To interest payable A/c $113 ( Being interest expense recognized for 1 month on Jonas Bank note.) 31-Dec P&L Ac Dr. $113 To interest expense A/c $113 (Being interest expense charged to P&L) Posting of Entries to Accounts Notes Payable A/c Date Particulars Debit Amount Date Particulars Credit Amount 31-Mar To Bal c/d $33,975 1-Feb By Creditor A/c $33,975 $33,975 $33,975 1-Apr To Cash & Bank A/c $33,975 1-Apr By Bal B/d $33,975 $33,975 $33,975 30-Sep To Bal c/d $42,680 1-Jul By Equipment A/c $42,680 $42,680 $42,680 1-Oct To Cash & Bank A/c $42,680 1-Oct By Bal B/d $42,680 $42,680 $42,680 31-Dec To Bal c/d $22,500 1-Dec By Cash & Bank A/c $22,500 $22,500 $22,500 Interest Payable A/c Date Particulars Debit Amount Date Particulars Credit Amount 31-Mar To Bal c/d $340 31-Mar By Interest Expense A/c $340 $340 $340 1-Apr To Cash & Bank A/c $340 1-Apr By Bal B/d $340 $340 $340 30-Sep To Bal c/d $747 30-Sep By Interest Expense A/c $747 $747 $747 1-Oct To Cash & Bank A/c $747 1-Oct By Bal B/d $747 31-Dec To Bal c/d $113 31-Dec By Interest Expense A/c $113 $859 $859 Interest Expense A/c Date Particulars Debit Amount Date Particulars Credit Amount 31-Mar To interest payable A/c $340 31-Mar By P&L A/c $340 $340 $340 30-Sep To Interest payable A/c $747 30-Sep By P&L A/c $747 $747 $747 31-Dec To Interest payable A/c $113 31-Dec By P&L A/c $113 $113 $113

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