Interest-Bearing Note Replacing an Unpaid Account Payable

Conti Products owed $50,000 on account for inventory purchased on December 1, 2024. Conti uses a perpetual inventory system and has a fiscal year that ends on December 31. Conti was unable to pay the amount owed by the March 1, 2025, due date because of financial difficulties. On March 1, 2025, Conti signed a 6-month, $50,000, 10.7% interest-bearing note. This note was repaid with interest on July 1, 2025.

Required:

If no entry is required, select "No entry required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

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1. Prepare the entry recorded on December 1, 2024.

2024 Dec. 1	Accounts PayableCashInventoryNo Entry RequiredNotes Payable
	Accounts PayableAccounts ReceivableInventoryNo Entry RequiredNotes Payable
	(Record purchase of inventory on account)

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2. Prepare the adjusting entry recorded on December 31, 2024.

2024 Dec. 31	Accounts PayableCashInventoryNo Entry RequiredNote Payable
	Accounts PayableCashInventoryNo Entry RequiredNote Payable
	(Year end adjustment)

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3. Prepare the entry recorded on March 1, 2025.

2025 Mar. 1	Accounts PayableAccounts ReceivableCashNo Entry RequiredNotes Payable
	Accounts PayableCashNo Entry RequiredNotes PayableNotes Receivable
	(Record issuance of note to cover unpaid account payable)

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4. Prepare the entry recorded on September 1, 2025. Do not round intermediate calculations. Round final answers to whole dollar.

2025 Sept. 1	Accounts PayableCashInterest PayableNotes PayableNotes Receivable
	Accounts PayableInterest ExpenseInterest PayableInventoryNotes Receivable
	Accounts PayableAccounts ReceivableCashInventoryNotes Receivable
	(Record payment of note and interest)