Question

In: Accounting

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

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.

Solutions

Expert Solution

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

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