Question

Required information [The following information applies to the questions displayed below.] Tyrell Co. entered into the following transactions involving short-term liabilities. Year 1 Apr. 20 Purchased $35,500 of merchandise on credit from Locust, terms n/30. May 19 Replaced the April 20 account payable to Locust with a 90-day, 8%, $35,000 note payable along with paying $500 in cash. July 8 Borrowed $57,000 cash from NBR Bank by signing a 120-day, 10%, $57,000 note payable. __?__ Paid the amount due on the note to Locust at the maturity date. __?__ Paid the amount due on the note to NBR Bank at the maturity date. Nov. 28 Borrowed $24,000 cash from Fargo Bank by signing a 60-day, 7%, $24,000 note payable. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. Year 2 __?__ Paid the amount due on the note to Fargo Bank at the maturity date. Required: 1. Determine the maturity date for each of the three notes described.

Determine the interest due at maturity for each of the three notes. (Do not round your intermediate calculations. Use 360 days a year.)

Determine the interest expense recorded in the adjusting entry at the end of Year 1. (Do not round your intermediate calculations. Use 360 days a year.)

Determine the interest expense recorded in Year 2. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Use 360 days a year.)

Prepare journal entries for all the preceding transactions and events. (Do not round your intermediate calculations.)

Answer 1

1.

	Maturity Date
Locust	August 17, Year 1
NBR Bank	November 5, Year 1
Fargo Bank	January 27, Year 2

2.

	Principal	x	Rate	x	Time	=	Interest
Locust	35000	x	8%	x	90	=	700
NBR Bank	57000	x	10%	x	120	=	1900
Fargo Bank	24000	x	7%	x	60	=	280

3.

Year end accrual required for:	Fargo Bank
	Principal	x	Rate	x	Time	=	Interest
Interest to be accrued in Year 1	24000	x	7%	x	33	=	154

4.

Year end accrual required for:	Fargo Bank
	Principal	x	Rate	x	Time	=	Interest
Interest to be recorded in Year 2	24000	x	7%	x	27	=	126

5.

Date	General Journal	Debit	Credit
Year 1
Apr. 20	Inventory	35500
	Accounts payable		35500
	(To record inventory purchased on account)
May. 19	Accounts payable	35500
	Cash		500
	Note payable		35000
	(To record note issued against payable)
Jul. 8	Cash	57000
	Note payable		57000
	(To record borrowing against note)
Aug. 17	Note payable	35000
	Interest expense	700
	Cash		35700
	(To record payment of note and interest)
Nov. 5	Note payable	57000
	Interest expense	1900
	Cash		58900
	(To record payment of note and interest)
Nov. 28	Cash	24000
	Note payable		24000
	(To record borrowing against note)
Dec. 31	Interest expense	154
	Interest payable		154
	(To record interest accrued)
Date	General Journal	Debit	Credit
Year 2
Jan. 27	Note payable	24000
	Interest payable	154
	Interest expense	126
	Cash		24280
	(To record payment of note and interest)