Question

Tyrell Co. entered into the following transactions involving short-term liabilities.

Year 1

Apr.		20		Purchased $39,000 of merchandise on credit from Locust, terms n/30.
May		19		Replaced the April 20 account payable to Locust with a 90-day, 7%, $35,000 note payable along with paying $4,000 in cash.
July		8		Borrowed $54,000 cash from NBR Bank by signing a 120-day, 12%, $54,000 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 $33,000 cash from Fargo Bank by signing a 60-day, 9%, $33,000 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.

4. 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.)

Tyrell Co. entered into the following transactions involving short-term liabilities.

Year 1

Apr.		20		Purchased $39,000 of merchandise on credit from Locust, terms n/30.
May		19		Replaced the April 20 account payable to Locust with a 90-day, 7%, $35,000 note payable along with paying $4,000 in cash.
July		8		Borrowed $54,000 cash from NBR Bank by signing a 120-day, 12%, $54,000 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 $33,000 cash from Fargo Bank by signing a 60-day, 9%, $33,000 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.

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

• 1. Purchased $39,000 of merchandise on credit from Locust, terms n/30.
• POSSIBLE INSERTS CAN BE:
• Accounts payable—Locust
• Accrued payroll payable
• Bonus payable
• Cash
• Cost of goods sold
• Deferred income tax liability
• Earned services revenue
• Earned ticket revenue
• Employee benefits plan payable
• Employee bonus expense
• Employee fed. inc. taxes payable
• Employee life insurance payable
• Employee medical insurance payable
• Employee union dues payable
• Estimated warranty liability
• Federal unemployment taxes payable
• FICA—Medicare taxes payable
• FICA—Social sec. taxes payable
• Income taxes expense
• Income taxes payable
• Interest expense
• Interest payable
• Merchandise inventory
• Notes payable—Fargo Bank
• Notes payable—Locust
• Notes payable—NBR Bank
• Payroll taxes expense
• Repair parts inventory
• Salaries expense
• Salaries payable
• Sales
• Sales salaries expense
• Sales taxes payable
• State unemployment taxes payable
• Unearned services revenue
• Unearned ticket revenue
• Vacation benefits expense
• Vacation benefits payable
• Wages expense
• Warranty expense
• 2. May: 19- Replaced the April 20 account payable to Locust with a 90-day, 7%, $35,000 note payable along with paying $4,000 in cash.
• 3.Jul 8- Borrowed $54,000 cash from NBR Bank by signing a 120-day, 12%, $54,000 note payable.
• 4. Paid the amount due on the note to Locust at the maturity date.
• 5.Paid the amount due on the note to NBR Bank at the maturity date.
• 6.Borrowed $33,000 cash from Fargo Bank by signing a 60-day, 9%, $33,000 note payable.
• 7.Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
• 8.Paid the amount due on the note to Fargo Bank at the maturity date.

Answer 1

1)	Maturity date
			locust	NBR	fargo
	date of the note		19-May	8-Jul	28-Nov
	term of note		90	120	60
	maturity date		17-Aug	5-Nov	27-Jan
2)	interest due at maturity
		principal	*	Rate	*	time	=	interest
	locust	35,000	*	7%	*	90/360	=	613
	NBR	54,000	*	12%	*	120/360	=	2160
	Fargo	33,000	*	9%	*	60/360	=	495

3)	Amount in adjusting entry
				Fargo Bank
			principal	*	Rate	*	time	=	interest
interest to be acccrued in 2016			33,000	*	9%	*	33/360	=	272
4)	interest expense to be recorded in 2017
			principal	*	Rate	*	time	=	interest
interest to recorded in 2018			33,000	*	9%	*	27/360	=	223

Journal entries
	Date	Accounting titles & Explanations				Debit	Credit
	2016
	20-Apr	inventory				39,000
		Accounts payable					39,000
	19-May	Accounts payable				39,000
		cash					4,000
		notes payable					35,000
	8-Jul	Cash				54,000
		notes payable					54,000
	17-Aug	notes payable				35,000
		interest expense				613
		cash					35,613
	5-Nov	notes payable				54,000
		interest expense				2,160
		cash					56,160

28-Nov	Cash				33,000
		notes payable					33,000
	31-Dec	interest expense				272
		interest payable					272
	2017
	27-Jan	notes payable				33,000
		interest payable				272
		interest expense				223
		cash					33,495