Problem $10\mathrm{.}3$A During the financial year ended $31$ December. Swanson Corporation engaged in the following transactions involving notes payable:

$6$ Aug. Borrowed $\backslash (\backslash$$ $12\mathrm{.}000\backslash )$ from Maple Bank, signing a $45-$day, $12$ percent note payable.

$16$ Sept. Purchased office equipment from Seawald Equipment. The invoice amount was $\backslash (\backslash$$ $18,000\backslash ),$ and Seawald agreed to accept. as full payment, a $10$ percent, three$-$month note for the invoice amount.

$20$ Sept. Paid Maple Bank the note plus accrued interest.

$1$ Nov. Borrowed $\backslash$$$250,000$ from Mike Swanson. a major corporate shareholder. The corporation issued Swanson a $\backslash (\backslash$$ $250,000\backslash ),15$ percent, $90-$day note payable.

$1$ Dec. Purchased inventory in the amount of $\backslash (\backslash$$ $5,000\backslash )$ from Gathman Corporation. Gathman accepted a $90-$day, $14$ percent note as full settlement of the purchase. Swanson Corporation uses a perpetual inventory system.

$16$ Dec. The $\backslash (\backslash$$ $18,000\backslash )$ note payable to Seawald Equipment matured today. Swanson paid the accrued interest on this note and issued a new $30-$day, $16$ percent note payable in the amount of $\backslash (\backslash$$ $18,000\backslash )$ to replace the note that matured.

Instructions

a$.$ Prepare journal entries $($in general journal form$)$ to record the above transactions. Use a $360-$day year in making the interest calculations.

b$.$ Prepare the adjusting entry needed at $31$ December, prior to closing the accounts. Use one entry for all three notes $($round to the nearest dollar$).$

c$.$ Provide a possible explanation why the new $30-$day note payable to Seawald Equipment pays $16$ percent interest instead of the $10$ percent rate charged on the $16$ September, note.