On May 1 comma 2019 , Jasper Company purchased inventory costing $ 87 comma 000 by signing a 10 %, nine-month, short-term note payable. Jasper will pay the entire note (principal and interest) on the note's maturity date. Journalize the company's (a) purchase of inventory; and (b) accrual of interest on the note payable on November 31 comma 2019. (Record debits first, then credits. Exclude explanations from any journal entries.)

Question

Camille Joyce

Business

17 November, 13:28

On May 1 comma 2019 , Jasper Company purchased inventory costing $ 87 comma 000 by signing a 10 %, nine-month, short-term note payable. Jasper will pay the entire note (principal and interest) on the note's maturity date. Journalize the company's (a) purchase of inventory; and (b) accrual of interest on the note payable on November 31 comma 2019. (Record debits first, then credits. Exclude explanations from any journal entries.)

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Natalie Le · Answer 1

The Journal entries are as follows:

(i) On May 1, 2019

Inventory A/c Dr. $87,000

To Notes payable $87,000

(To record purchase of inventory)

(ii) On Nov 31, 2019

Interest Expense A/c Dr. $5,075

To Interest payable $5,075

(To record the Accrued the interest.)

Workings:

May to Nov = 7 months

Therefore,

Interest Expense = 87,000 * 10% * 7:12

= $5,075