Prepare entries for interest-bearing notes.

E11.1 (LO 1), AP C.S. Lewis Company had these transactions involving notes payable.

July 1, 2022, Borrows $50,000 from First National Bank by signing a 9-month, 8% note.

Nov. 1, 2022, Borrows $60,000 from Lyon County State Bank by signing a 3-month, 6% note.

Dec. 31, 2022, Prepares adjusting entries.

Feb. 1, 2023, Pays principal and interest to Lyon County State Bank.

Apr. 1, 2023, Pays principal and interest to First National Bank.

Instructions

Prepare journal entries for each of the transactions.

Prepare entries for interest-bearing notes.

E11.6 (LO 2), K Gallardo Co. is involved in a lawsuit as a result of an accident that took place September 5, 2022. The lawsuit was filed on November 1, 2022, and claims damages of $1,000,000.

Instructions

A) At December 31, 2022, Gallardos attorneys feel it is remote that Gallardo will lose the lawsuit. How should the company account for the effects of the lawsuit?

B) Assume instead that on December 31, 2022, Gallardos attorneys feel it is probable that Gallardo will lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit?

C) Assume instead that on December 31, 2022, Gallardos attorneys feel it is reasonably possible that Gallardo could lose the lawsuit and be required to pay $1,000,000. How should the company account for this lawsuit?

Prepare the current liabilities section of the balance sheet.

P11.2 (LO 1, 2), AP These 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.

Instructions

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 on December 31.

D) What is the total interest expense for the year?

d. $2,110

Prepare payroll register and payroll entries.