P10-2B Majestic Mountain Bikes markets mountain-bike tours to clients vacationing in various…P10-2B Majestic Mountain Bikes markets mountain-bike tours to clients vacationing in various…

P10-2B Majestic Mountain Bikes markets mountain-bike tours to clients vacationing in various locations in the mountains of Colorado. In preparation for the upcoming summer biking season, Majestic entered into the following transactions related to notes payable.

Mar. 1 Purchased Puma bikes for use as rentals by issuing a $9,000, 3-month, 6% note payable that is due June 1.

Mar. 31 Recorded accrued interest for the Puma note.

Apr. 1 Issued a $45,000 9-month note for the purchase of mountain property on which to build bike trails. The note bears 8% interest and is due January 1.

Apr. 30 Recorded accrued interest for the Puma note and the land note.

May 1 Issued a 4-month note to Jackson State Bank for $12,000 at 6%. The funds will be used for working capital for the beginning of the season; the note is due September 1.

May 31 Recorded accrued interest for all three notes.

June 1 Paid principal and interest on the Puma note.

June 30 Recorded accrued interest for the land note and the Jackson State Bank note.

Instructions

(a) Prepare journal entries for the transactions noted above.

(b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Use T accounts.)

(c) Assuming that Majestic"s year-end is June 30, show the balance sheet presentation of notes payable and interest payable at that date.

(d) How much interest expense relating to notes payable did Majestic incur during the year?

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