On December 1, 2013, Insto Photo Company purchased merchandise, invoice price $25,000, and issued a 12%, 120-day note to Ringo Chemicals Company. Insto uses the calendar year as its fiscal year and uses the perpetual inventory system.

Prepare journal entries on Insto's books to record the preceding information, including the adjusting entry at the end of the year and payment of the note at maturity. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Assume a 360-day year.

So far I have:

Inventory 25,000(debit)

Notes Payable 25,000 (cr)

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Interest Expense ? (Debit)

Interest Payable ?(Cr)

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Interest Expense ? (debit)

Interest Payable ? (Debit)

Notes Payable 25,000 (Debit)

Cash 26,000(cr)

I know the interest expense and payable in the last group needs to equal 1,000 but Im not sure how.

I thought the interest expense/Payable in the second group was 1,000, but it is not. Nor is it 3,000, or any number I have tried. Please explain to me how I can get the answers to the question marked areas!

THANKS!