On May 1 comma 2019May 1, 2019, JasperJasper Company purchased inventory costing $ 95 comma 000$95,000 by signing aa 66%, 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 November 31 comma 2019November 31, 2019. (Record debits first, then credits. Exclude explanations from any journal entries.)

(a) Journals to record the purchase of inventory:

Debit Inventory                            $95,000

Credit Note payable                    $95,000

(To record the purchase of inventory)

(b) Accrual of interest on the note payable on November 31, 2019:

Debit Interest expense                 $47,025

Credit Interest payable                 $47,025

(Total interest accrual on notes)

Explanation:

Note receivable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.

The interest expense on the notes is calculated as: Principal x Interest Rate x Time

In this case, the total interest expense is $95,000 x 66%/12 x 9 months = $47,025.

Monthly interest expense is $47,025 / 9 months = $5,225.

For accrual purpose, Jasper Company would be recording the following journals on a monthly basis before the actual cash payment:

Debit Interest expense                 $5,225

Credit Interest payable                 $5,225

(Monthly recognition of interest expense on notes)

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