The following are selected transactions of Blanco Company. Blanco prepares financial statements quarterly. Jan. 2 Purchased merchandise on account from Nunez Company, $30,000, terms 2/10, n/30. (Blanco uses the perpetual inventory system.)
Feb. 1 Issued a 9%, 2-month, $30,000 note to Nunez in payment of account.
Mar. 31 Accrued interest for 2 months on Nunez note.
Apr. 1 Paid face value and interest on Nunez note.
July 1 Purchased equipment from Marson Equipment paying $11,000 in cash and signing a 10%, 3-month, $60,000 note.
Sept. 30 Accrued interest for 3 months on Marson note.
Oct. 1 Paid face value and interest on Marson note.
Dec. 1 Borrowed $24,000 from the Paola Bank by issuing a 3-month, 8% note with a face value of $24,000.
Dec. 31 Recognized interest expense for 1 month on Paola Bank note.

Required:
a. Prepare journal entries for the listed transactions and events.
b. Post to the accounts Notes Payable, Interest Payable, and Interest Expense.
c. Show the balance sheet presentation of notes and interest payable at December 31.
d. What is total interest expense for the year?

Journal entries are the bookkeeping entries that are recorded to maintain the record of the transactions of the firm. It records all the debit and credit transactions of the company.

The Journal entries, ledger accounts, and the balance sheet has been attached below.

The total interest expense for the year is $2,110

To know more about the various financial statements, refer to the link below:

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Blanco Company

a. Journal Entries

Jan. 2:

Debit Inventory $30,000

Credit Accounts Payable (Nunez Company) $30,000

To record the purchase of merchandise, terms 2/10, n/30.

Feb 1:

Debit Accounts Payable (Nunez Company) $30,000

Credit Notes Payable (Nunez Company) $30,000

To record the issue of 9%, 2-month note in payment of account.

March 31:

Debit Interest Expense $450

Credit Interest Payable $450

To accrue 2 months interest expense.

Apr. 1:

Debit Notes Payable (Nunez Company) $30,000

Debit Interest Payable $450

Credit Cash Account $30,450

To record the payment on notes payable.

July 1:

Debit Equipment $71,000

Credit Cash $11,000

Credit Notes Payable $60,000

To record the purchase of equipment and signing a 10% , 3-month note.

Sept. 30:

Debit Interest Expense $1,500

Credit Interest Payable (Marson Equipment) $1,500

To accrue interest expense for 3 months.

Oct. 1:

Debit Notes Payable (Marson Equipment) $60,000

Debit Interest Payable (Marson Equipment) $1,500

Credit Cash Account $61,500

To record payment on account.

Dec. 1:

Debit Cash Account $24,000

Credit Notes Payable (Paola Bank) $24,000

To record the issue of a 3-month, 8% note.

Dec. 31

Debit Interest Expense $160

Credit Interest Payable $160

To accrue interest expense for one month.

b. General Ledger for Notes Payable, Interest Payable, and Interest Expense

Notes Payable

Date   Accounts Title                      Debit        Credit

Feb. 1 Accounts Payable (Nunez Company) $30,000

Apr. 1  Cash                                   $30,000

July 1  Equipment                                           $60,000

Oct. 1  Cash                                  $60,000

Dec. 1 Cash                                  $24,000

Interest Payable

Date      Accounts Title         Debit        Credit

Mar. 31  Interest Expense                      $450

Apr. 1     Cash                      $450

Sept 30 Interest Expense                   $1,500

Oct. 1     Cash                   $1,500

Dec. 31  Interest Expense                      $160

Interest Expense

Date      Accounts Title         Debit        Credit

Mar. 31  Interest Payable      $450

Sept 30 Interest Payable   $1,500

Dec. 31  Interest Payable      $160

Dec. 31  Income Summary                   $2,110

c. Balance Sheet presentation of notes and interest payable at December 31:

Current Liabilities:

Notes Payable              $24,000

Interest Payable                 $160

d. Total interest expense for the year:

= $2,110

Explanation:

In this case, Blanco Company uses adjusting entries to accrue expenses, especially interest expense with their corresponding payables.

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