Question

Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017.

2016

Apr.		20		Purchased $39,000 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 $4,000 in cash.
July		8		Borrowed $63,000 cash from NBR Bank by signing a 120-day, 10% 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, 9% 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.

Required:
1. Determine the maturity date for each of the three notes described

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

3. Determine the interest expense to be recorded in the adjusting entry at the end of 2016. (Do not round your intermediate calculations. Use 360 days a year.)

4. Determine the interest expense to be recorded in 2017. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Use 360 days a year.)

5.1 Prepare journal entries for all the preceding transactions and events for 2016. (Do not round your intermediate calculations.)

Answer 1

1. & 2.

	Period	Maturity Date	Interest
May19 Note-Locust	90	Aug-17, 2016	$              700
Jul 8 Note - NBR Bank	120	Nov-05, 2016	$           2,100
Nov 28 - Note Fargo Bank	60	Jan-27, 2017	$              495

3. Interest Expense to be recorded = $272 i.e. $33000*9%*33/360

4.

Date	Account Titles	Debit	Credit
Apr-20	Inventory	$        39,000
	Accounts Payable		$           39,000
May-19	Accounts Payable	$        39,000
	Cash		$             4,000
	Notes Payable-Locust		$           35,000
Jul-08	Cash	$        63,000
	Notes Payable-NBR		$           63,000
Aug-17	Notes Payable-Locust	$        35,000
	Interest Expense	$              700
	Cash		$           35,700
Nov-05	Notes Payable-NBR	$        63,000
	Interest Expense	$          2,100
	Cash		$           65,100
Nov-28	Cash	$        33,000
	Notes Payable-Fargo		$           33,000
Dec-31	Interest Expense	$              272
	Interest Payable		$                 272
2017
Jan-27	Notes Payable-Fargo	$        33,000
	Interest Payable	$              272
	Interest Expense	$              223
	Cash		$           33,495