In: Accounting
The January 1, Year 1 trial balance for the Wilson Company is found on the trial balance tab. The beginning balances are assumed. Smith Co. entered into the following transactions involving short-term liabilities. (Use 360 days a year.) Year 1 Apr. 20 Purchased $43,750 of merchandise on credit from Sanchez, terms n/30. May 19 Replaced the April 20 account payable to Sanchez with a 90-day, 8%, $38,000 note payable along with paying $5,750 in cash. July 8 Borrowed $102,000 cash from NBR Bank by signing a 120-day, 12%, $102,000 note payable. Aug. 17 Paid the amount due on the note to Sanchez at the maturity date. Nov. 5 Paid the amount due on the note to NBR Bank at the maturity date. Nov. 28 Borrowed $63,000 cash from Chicago Bank by signing a 60-day, 12%, $63,000 note payable. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Chicago Bank. Year 2 Jan. 27 Paid the amount due on the note to Chicago Bank at the maturity date.
General Journal tab - Prepare the Year
1 journal entries related to the notes and accounts payable of
Smith Co.
Calculation of interest tab - Use the
interest formula (P x R x T) to verify the amount of interest
recorded in your entries. Verify that total interest expense agrees
with the trial balance.
Year 2 payment tab - Prepare the January
27, Year 2 entry to record the repayment of the note at
maturity.
Sanchez | NBR Bank | Chicago Bank | ||
Maturity Date | Aug 17 | Nov 05 | Jan 27 | |
Principal | Rate | Time | Interest | |
Sanchez | $ 38,000 | 8% | 90 | $ 760 |
NBR Bank | $ 102,000 | 12% | 120 | $ 4,080 |
Chicago Bank | $ 63,000 | 12% | 60 | $ 1,260 |
Principal | Rate | Time | Interest | |
Interest Accrued Year 1 | $ 63,000 | 12% | 33 | $ 693 |
Principal | Rate | Time | Interest | |
Interest Year 2 | $ 63,000 | 12% | 27 | $ 567 |
Date | Account Titles | Debit | Credit |
Apr-20 | Inventory | $ 43,750 | |
Accounts Payable | $ 43,750 | ||
May-19 | Accounts Payable | $ 43,750 | |
Cash | $ 5,750 | ||
Notes Payable-Sanchez | $ 38,000 | ||
Jul-08 | Cash | $ 102,000 | |
Notes Payable-NBR bank | $ 102,000 | ||
Aug-17 | Notes Payable-Sanchez | $ 38,000 | |
Interest Expense | $ 760 | ||
Cash | $ 38,760 | ||
Nov-05 | Notes Payable-NBR Bank | $ 102,000 | |
Interest Expense | $ 4,080 | ||
Cash | $ 106,080 | ||
Nov-28 | Cash | $ 63,000 | |
Notes Payable-Chicago | $ 63,000 | ||
Dec-31 | Interest Expense | $ 693 | |
Interest Payable | $ 693 | ||
Year 2 | |||
Jan-27 | Notes Payable-Chicago | $ 63,000 | |
Interest Payable | $ 693 | ||
Interest Expense | $ 567 | ||
Cash | $ 64,260 |