P11-2A. The following are selected transactions of Winsky Company.

Winsky prepares
financial statements quarterly. Jan. 2 Purchased merchandise on account from Yokum
Company, $30,000, terms 2/10, n/30. Feb. 1 Issued a 9%, 2-month, $30,000 note to
Yokum in payment of account. Mar. 31 Accrued interest for 2 months on Yokum note.
Apr. 1 Paid face value and interest on Yokum note. July 1 Purchased equipment from
Korsak Equipment paying $11,000 in cash and signing a 10%, 3-month, $40,000 note.
Sept. 30 Accrued interest for 3 months on Korsak note. Oct. 1 Paid face value and interest
on Korsak note. Dec. 1 Borrowed $15,000 from the Otago Bank by issuing a 3-month,
8% interest-bearing note with a face value of $15,000. Dec. 31 Recognized interest
expense for 1 month on Otago Bank note. Hint: Journalize and post note transactions;
show balance sheet presentation. (SO 2) Instructions (a) Prepare journal entries for the
above 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? (d) $1,550

(a) Jan.  2 Merchandise Inventory or

  Purchases................................................................... 30,000
Accounts Payable................................................
30,000

Feb.  1 Accounts Payable.......................................................... 30,000

Notes Payable......................................................
30,000

Mar. 31 Interest Expense...........................................................    450

  ($30,000 X 9% X 2/12)
Interest Payable..................................................
   450

Apr.  1 Notes Payable................................................................ 30,000

Interest Payable............................................................    450
Cash.....................................................................
30,450

July  1 Equipment..................................................................... 51,000

Cash.....................................................................
11,000
Notes Payable......................................................
40,000

Sept. 30 Interest Expense...........................................................    1,000

  ($40,000 X 10% X 3/12)
 Interest Payable..................................................
   1,000

Oct.  1 Notes Payable................................................................ 40,000

Interest Payable............................................................   1,000
Cash.....................................................................
41,000

Dec.  1 Cash ...................................................................15,000

Notes Payable......................................................
15,000

Dec. 31 Interest Expense...........................................................    100

  ($15,000 X 8% X 1/12)
Interest Payable..................................................
   100

(b)
Notes Payable
4/1 30,000 2/1 30,000
10/1 40,000 7/1 40,000
12/1 15,000
12/31 Bal. 15,000

Interest Payable
4/1    450 3/31    450
10/1  1,000 9/30  1,000
12/31    100
12/31 Bal.    100

Interest Expense
3/31    450
9/30  1,000
12/31    100
12/31 Bal.  1,550

(c) Current liabilities

Notes payable......................................................................... $15,000
 Interest payable..................................................................... 100
$15,100

(d) Total interest is $1,550.