The following are selected transactions of Karolina Company. Karolina prepares financial statements quarterly. Jan. 2 Purchased merchandise

Question:

The following are selected transactions of Karolina Company. Karolina prepares financial statements quarterly.

Jan. 2 Purchased merchandise on account from Pavel Company, $20,000, terms 2/10, n/30. (Karolina uses the perpetual inventory system.)

Feb. 1 Issued a 12%, 2-month, $20,000 note to Pavel in payment of account.

Mar. 31 Accrued interest for 2 months on Pavel note.

Apr. 1 Paid face value and interest on Pavel note.

July 1 Purchased equipment from Filipensky Equipment paying $12,000 in cash and signing a 10%, 3-month, $25,000 note.

Sept. 30 Accrued interest for 3 months on Filipensky note.

Oct. 1 Paid face value and interest on Filipensky note.

Dec. 1 Borrowed $15,000 from the Federated Bank by issuing a 3-month, 12% note with a face value of $15,000.

Dec. 31 Recognized interest expense for 1 month on Federated Bank note.

Instructions

(a) Prepare journal entries for the above transactions and events.

(b) Post to the accounts, Notes Payable, Interest Payable, and Interest Expense.

(d) What is total interest expense for the year?

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