Question

Oriole Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2022 Oriole had the following transactions related to notes payable. Sept. 1 Issued a $13,200 note to Pippen to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1. (Oriole uses a perpetual inventory system) Sept. 30 Recorded accrued interest for the Pippen note. Oct. 1 Issued a $20,400, 9 % , 4 -month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1 Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note. Nov. 1 Issued a $30,000 note and paid $8,700 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 6 % and matures in 12 months Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note. Paid principal and interest on the Pippen note. Recorded accrued interest for the Prime Bank note and the vehicle note. Nov. 30 Dec. 1 Dec. 31

Answer 1

Account Titles and Explanation Debit Credit Date Sep-01 Inventory $13,200 Notes Payable $13,200 (Being merchandise purchased on credit from Pippen by issuing 6% note) Sep-30 Interest Expense Interest Payable (Being interest accrued on 6 % Note) 66 $ 66 Oct-01 Climbing Wall $ 20,400 $ 20,400 Notes Payable (Being 9% note payable issued to Prime Bank for purchase of climbing wall) Oct-31 Interest Expense Interest Payable $ 219 $ 219 (Being interest accrued on 6% and 9% note) Nov-01 Vehicle $38,700 Cash $8,700 $ 30,000 Notes Payable (Being vehicle purchased) Nov-30 Interest Expense 369 $ Interest Payable 369 (Being interest accrued on 9%, 6% notes)

Notes Payable Interest Payable $13,200 Dec-01 198 $ 13,398 Cash (Being cash paid to Pippen along with interest) Dec-31 Interest Expense 303 Interest Payable $ 303 (Being interest accrued on 9%, 6% notes )

Workings: Sep-30 = Note Valuex rate x no of months Interest Expense 13,200 x 6% x 1/12 = $66 Oct-31 Interest Expense for Pippen Note = Note Value x rate x no of months - 13,200 x 6 % x 1/12 = $ 66 Interest Expense for Prime Bank Note = Note Value x rate x no of months - 20,400 x 9% x 1/12 = $153 Total Interest 66+153 = $ 219

Nov-30 Interest Expense for Pippen Note = Note Value x rate x no of months 13,200 x 6% x 1/12 = $ 66 Note Value x rate x no of months Interest Expense for Prime Bank Note - 20,400 x 9% x 1/12 $153 Interest Expense for Vehicle Note = Note Value x rate x no of months - 30,000 x 6% x 1/12 = $150 Total Interest 66 153 150 = $ 369 Dec-31 Interest Expense for Prime Bank Note = Note Value x rate x no of months 20,400 x 9% x 1/12 = $153 Interest Expense for Vehicle Note = Note Value x rate x no of months - 30,000 x 6% x 1/12 = $ 150 Total Interest 153 150 = $303

Dec-01 Dec-31 Notes Payable $ 13,200 Sep-01 $ 13,200 $ 50,400 Oct-01 $ 20,400 Nov-01 $ 30,000 $ 63,600 Dec-31 $ 63,600 Dec-31 $ 66 Interest Payable Dec-01 $ 198 Sep-30 Dec-31 $ 759 Oct-31 $ Nov-30 $ Dec-31 $ Dec-31 $ 957 Dec-31 $ 219 369 303 957 $ 957 Interest Expense Sep-30 $ 66 Dec-31 Oct-31 $ 219 Nov-30 $ 369 Dec-31 $ 303 Dec-31 $ 957 Dec-31 $ 957

Oriole Corporation Balance Sheet (Partial) Dec-31 Current Liabilities Notes Payable Interest Payable Total $50,400 $ 759 51,159 $957 Total Interest Expense for the Year