I'm working on the "home heaters, a holistic view of financial statements" case (I'm sure you've heard of it...)

I'm having difficulty on figuring out the interest questions, ex:

A) On January 2, each company borrowed $400,00- on a 20 year, 7% note payable, interest plus 20,000 principle due in September 30, each year.

B)On September 30, the first 20,000 principal payment plus nine month's interest was made on the NP from A)

C)Management made an adjusting entry to accuse three months interest on the NP in A and B.

Can you help me with with the journal entries/amounts would be? I'm a little unsure of the rates/simple/compound/etc.

Also if a "company" is started with issuing 3,200 shares of capital stock for 160,000 and then later pays dividends of $7.25 per share, will I have 4 entries: DB - Retained earnings and Dividends payable and CR to Dividends Payable and Cash? (date it is announced vs. date paid)

I'd appreciate any help you could give! (I've attached the questions if you need any more detail).

Marv

1. On January 2, each company issued 3,200 sillk'"es of capital stock for $160,000 and commenced operations. - .. .. -~ 2. On. January 2, each company borrowed $400,000 on a 20-year, 7 percent note payable. Interest plus $20,000 principal is due September 30 each year, beginning 2015. 3. On January 3, each company purchased land and a building for $420,000. Both managers assigned $70,000 to the land and $350,000 to the building. Each company paid cash for the land and building. 4. On January 5, each company purchased delivery equipment at a cost of $80,000. Both purchases were made with cash. 5. Each company sells one model of home heating unit, and made the following credit purchases during the year. (you may record all the purchases in one transaction.) 6. Each company sold 160 units for $398,500 during the year. All sales were on credit; 90 days, same as cash. You will just record the sales piece of this transaction for now. Management has not yet determined how inventory and cost of goods sold will be valued. Therefore, this year, management will use the periodic inventory system and record cost of goods sold at the end of the year (in Part B). 7. $299,100 was collected during the year on the sales described in Transaction 6 above. 8. $213,360 was paid on the purchases made in Transaction 5 above. 9. On September 30, the first $20,000 principal payment plus nine months' interest was made on the note payable described in Transaction 2. 10. A total of $34,200 was paid for a variety of expenses, such as advertising, supplies, insurance, and wages. These expenses are recorded in an account called "other operating expenses." lL Dividends of $725 per share were paid to the stockholders on December I. 12. management made adjusting entry to accrue three months' interest on the note payable in Transactions 2 and 9 above