Question

Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017. 2016 Apr. 20 Purchased $38,000 of merchandise on credit from Locust, terms n/30. Tyrell uses the perpetual inventory system. May 19 Replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 8% annual interest along with paying $3,000 in cash. July 8 Borrowed $63,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with a face value of $63,000. __?__ 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, 7% interest-bearing note with a face value of $33,000. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2017 __?__ 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	*	8%	*	90/360	=	700
	NBR	63,000	*	11%	*	120/360	=	2310
	Fargo	33,000	*	7%	*	60/360	=	385
3)	Amount in adjusting entry
	33,000*7%*33/360
	211.75
			principal	*	Rate	*	time	=	interest
interest to be acccrued			33,000	*	7%	*	33/360	=	211.75
4)	interest expense to be recorded in 2017
	198
			principal	*	Rate	*	time	=	interest
interest to recorded in 2018			33,000	*	7%	*	27/360	=	173.25
	Journal entries
	Date	Accounting titles & Explanations				Debit	Credit
	2016
	20-Apr	inventory				38,000
		Accounts payable					38,000
	19-May	Accounts payable				38,000
		cash					3,000
		notes payable					35,000
	8-Jul	Cash				63,000
		notes payable					63,000
	17-Aug	notes payable				35,000
		interest expense				700
		cash					35,700
	5-Nov	notes payable				63,000
		interest expense				2,310
		cash					65,310
	28-Nov	Cash				33,000
		notes payable					33,000
	31-Dec	interest expense				211.75
		interest payable					211.75
	2017
	27-Jan	notes payable				33,000
		interest payable				211.75
		interest expense				173.25
		cash					33,385