P10-2A Ehler Corporation sells rock-climbing products and also operates an indoo
ID: 2540573 • Letter: P
Question
P10-2A Ehler Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Ehler had the fol- lowing transactions related to notes payable. Issued a $12,000 note to Pippen to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1, (Ehler uses a perpetual inventory system.) Recorded accrued interest for the Pippen note. Issued a $16,500, 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. Sept.1 Sept. 30 Oct. 1 Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note Nov 1 Issued a $26,000 note and paid $8,000 cash to purchase a vehicle to transport dlients to nearby climbing sites as part of a new series of climbing classes. This te bears interest of 6% and matures in 12 months Now 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note Dec1 Paid principal and interest on the Pippen hote Dec. 3i Recorded accrued interest for the Prime Bank note and the vehicle noteExplanation / Answer
(a)
(b)
(c)
(d) Interest expense incurred during the year: $770
Date Account Titles and Explanation Debit Credit 2017 Sept. 1 Inventory 12000 Notes payable 12000 (To record issue of note payable against inventory purchase) Sept. 30 Interest expense ($12000 x 6% x 1/12) 60 Interest payable 60 (To record interest accrued on note payable) Oct. 1 Cash 16500 Notes payable 16500 (To record issue of note payable for loan from bank) Oct. 31 Interest expense [$60 + ($16500 x 8% x 1/12)] 170 Interest payable 170 (To record interest accrued on note payable) Nov. 1 Vehicle 34000 Cash 8000 Notes payable 26000 (To record issue of note payable against vehicle purchase) Nov. 30 Interest expense 300 Interest payable 300 $60 + $110 + ($26000 x 6% x 1/12)] (To record interest accrued on note payable) Dec. 1 Notes payable 12000 Interest payable (3 x $60) 180 Cash 12180 (To record payment of note and interest on maturity) Dec. 31 Interest expense ($110 + $130) 240 Interest payable 240 (To record interest accrued on note payable)Related Questions
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