On March 1 comma 2019March 1, 2019 , JasperJasper Company purchased inventory costing $ 87 comma 000$87,000 by signing aa 1010 %, nine-month, short-term note payable. JasperJasper will pay the entire note (principal and interest) on the note's maturity date. Journalize the company's (a) purchase of inventory; and (b) accrual of interest on the note payable on September 31 comma 2019September 31, 2019

Answer and Explanation:

The journal entries are shown below:

a. On March 1

Merchandise inventory $87,000

To Note payable $87,000

(Being the purchase of inventory is recorded)

Since the inventory is purchased which increased the assets so we debited the inventory and at the same time it also increase the liabilities so the note payable is credited

b. On September 30

Interest expense $5,075

To Interest payable $5,075

(Being the interest expense is recorded)

= $87,000 * 10% * 7 months : 12 months

= $5,075

The seven months is calculated from March 1 to September 30

While recording this entry we debited the interest expense as it increased the expenses and at the same time it also increases the liabilities so the interest payable is credited