Chapter 8, Problem 8.12AE

  LO 3

(Learning Objective 3: Purchase inventory, accrue interest, and pay a short-term note) On August 1,2019, The Shoppes at Mill Lake, Inc., purchased inventory costing $40,000 by signing a 6%, six-month, short-term note payable. The company will pay the entire note (principal and interest) on the note’s maturity date.

  Requirements

  1.    Journalize the company’s purchase of inventory.

  2.    Make the adjusting entry for accrual of interest on the note payable on December 31, 2019.

  3.    At December 31, 2019, what is reported on the balance sheet related to this note payable?

  4.    Record the payment of the note payable (principal and interest) on its maturity date.