Question

Franklin Sports Authority purchased inventory costing $ 24,000 by signing a 10​%, ​six-month, short-term note payable. The purchase occurred on May 1, 2018. Franklin will pay the entire note​ (principal and​ interest) on the​ note's maturity date of November ​1, 2018. Journalize the​ company's (a) purchase of​ inventory; and​ (b) payment of the note plus interest on November 1, 2018.

Answer 1

Journal

Date	Account Title and Explanation	Debit	Credit
May 1, 2018	Inventory	24,000
	Note payable		24,000
	(To record purchase of inventory on account)
Nov 1, 2018	Note payable	24,000
	Interest expense	1,200
	Cash		25,200
	(To record payment of note and interest at maturity)

Interest on note = Par value of note x Interest rate x Time perid

= 24,000 x 10% x 6/12

= $1,200

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