The following are selected transactions of Graves Company. Graves prepares financial statements quarterly.
|Jan. 2||Purchased merchandise on account from Ally Company, $35,175, terms 2/10, n/30. (Graves uses the perpetual inventory system.)|
|Feb. 1||Issued a 6%, 2-month, $35,175 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 $10,560 in cash and signing a 7%, 3-month, $43,840 note.|
|Sept. 30||Accrued interest for 3 months on Clark note.|
|Oct. 1||Paid face value and interest on Clark note.|
|Dec. 1||Borrowed $18,000 from the Jonas Bank by issuing a 3-month, 6% note with a face value of $18,000.|
|Dec. 31||Recognized interest expense for 1 month on Jonas Bank note.|
Prepare journal entries for the listed transactions and events. (Round answers to 0 decimal places, e.g. 125.)
Post to the accounts Notes Payable, Interest Payable, and Interest Expense. (Post entries in the order of journal entries in the previous question.) Show the balance sheet presentation of notes and interest payable at December 31.
What is the total interest expense for the year?
Interest expense is a non-operating related expense treated as deduction from income on the income statement. It is the interest payable on any borrowings.
Answer and Explanation:
|Jan 2||Merchandise Inventory||35,175|
|Feb 1||Accounts Payable||35,175|
|Mar 31||Interest Expense ($35,175 x 6% x 2/12)||351.75|
|Apr 1||Notes Payable||35,175|
|Sept 30||Interest Expense (43,840 x 7% x 3/12)||767.20|
|Oct 1||Notes Payable||43,840|
|Dec 31||Interest Expense||90|
The total interest expense is then $351.75 + $767.20 + $90 = $1,208.95.
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 18