E13-2B (Accounts and Notes Payable) The following are selected 2014 transactions of Palmeiro Corporation. Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records purchases gross and uses a periodic inventory system. Oct.

E13-2B (Accounts and Notes Payable) The following are selected 2014 transactions of Palmeiro Corporation.

Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records purchases gross and            uses a periodic inventory system.

Oct. 1 Issued a $125,000, 12-month, 12% note to Ripken in payment of account.

Oct. 1 Borrowed $125,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $142,000 note.

Instructions

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

(b) Prepare adjusting entries at December 31. (Use straight-line amortization of the discount.)

(c) Compute the total net liability to be reported on the December 31 balance sheet for:

   (1) the interest-bearing note.

   (2) the zero-interest-bearing note. (Use straight-line amortization.)