1. On May 1, 2015, ACE Corp. purchased parts from SUPPLY Corp. In payment for th
ID: 2478176 • Letter: 1
Question
1. On May 1, 2015, ACE Corp. purchased parts from SUPPLY Corp. In payment for the $48,000 purchase, ACE issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%.
1. What entry will ACE make to record the May 1, 2015 purchase of the parts?
2. What entry will ACE make to record the 1st installment payment on May 31, 2015?
3. How much interest expense will ACE report in its income statement for the year ended 06/30/2015?
Explanation / Answer
Answer:1
Merchandise inventory A/C Dr. $48000
To Notes Payable A/C $48000
Answer:2 Notes payable A/C Dr.4000
Interest a/C Dr. $480
To cash A/C $4480
Answer:3 Interest expense=$960 (48000*12%*2/12)
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