Question

Zing Cell Phone Company entered into the following transactions involving current liabilities during 2017 and 2018.

	2017
Mar.	14	Purchased merchandise on credit from Ferris Inc. for $146,000. The terms were 1/10, n/30 (assume a perpetual inventory system).
Apr.	14	Zing paid $28,000 cash and replaced the $118,000 remaining balance of the account payable to Ferris Inc. with a 4%, 60-day note payable.
May	21	Borrowed $128,000 from Scotia Bank by signing a 3.5%, 90-day note.
	?	Paid the note to Ferris Inc. at maturity.
	?	Paid the note to Scotia Bank at maturity.
Dec.	15	Borrowed $103,000 and signed a 4.25%, 120-day note with National Bank.
Dec.	31	Recorded an adjusting entry for the accrual of interest on the note to National Bank.
	2018
	?	Paid the note to National Bank at maturity.

Required:
1. Determine the maturity dates of the three notes just described.

2. Present journal entries for each of the preceding dates. (Use 365 days an year. Round your answers to 2 decimal places.)

1

Record the purchase of merchandise on credit.

2

Record the payment of cash and a note written to exchange due date.

3

Record the borrowing of cash with a 90-day against note.

4

Record the payment of note with interest.

5

Record the payment of note with interest.

6

Record the borrowing of cash with a 120-day note.

7

Record the accrued interest on note payable.

8

Record the payment of note with interest.

Answer 1

1.

April 14 + 60 Days = June 13

May 21 + 90 Days = August 19

December 15 + 120 Days = April 14

2.

Mar-14	Merchandise inventory	$ 146,000
	Accounts payable - Ferris Inc		$ 146,000

3.

Apr-14	Accounts payable - Ferris Inc	$ 146,000
	Cash		$    28,000
	4% Note payable		$ 118,000

4.

May-21	Cash	$ 128,000
	3.5% Note payable		$ 128,000

5.

Jun-13	4% Note payable	$ 118,000.00
	Interest expenses ($118,000*4%*60/365)	$          775.89
	Cash		$ 118,775.89

6.

Aug-19	3.5% Note payable	$ 128,000.00
	Interest expense ($128,000*3.5%*90/365)	$      1,104.66
	Cash		$ 129,104.66

7.

Dec-15	Cash	$ 103,000
	4.25% Note payable		$ 103,000

8.

Dec-31	Interest expense ($103,000*4.25%*16/365)	$ 191.89
	Interest payable		$ 191.89

9.

Apr-14	4.25% Note payable	$ 103,000.00
	Interest payable	$          191.89
	Interest expense ($103,000*4.25%*104/365)	$      1,247.29
	Cash		$ 104,439.18