Problem 11-1A Part 1
Required:
1. Determine the maturity date for each of the
three notes described.
Problem 11-1A Part 2
2. Determine the interest due at maturity for each of the three notes. (Do not round your intermediate calculations. Use 360 days a year.)
Problem 11-1A Part 3
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.)
Problem 11-1A Part 4
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.)
Problem 11-1A Part 5
5.1 Prepare journal entries for all the preceding transactions and events for 2016. (Do not round your intermediate calculations.)
SOLUTION
1. Calculation of the maturity date for each of the three notes-
L | NBR Bank | F Bank | |
Date of note | 19 May | 8 July | 28 November |
Term of note (in days) | 90 | 120 | 60 |
Maturity date | 17 August | 5 November | 27 January |
2. Calculation of interest due-
L | NBR Bank | F Bank | |
Principal (a) | 35,000 | 80,000 | 42,000 |
Annual interest rate (b) | 10% | 9% | 8% |
Term of note (in days) (c) | 90 | 120 | 60 |
Interest expense (a*b*c/360) | 875 | 2,400 | 560 |
3. The interest expense to be recorded in the adjusting entry at the end of 2016-
Interest to be accrued at the end of 2016 = Principal * Interest rate * Term of note/360 days
= $42,000 * 8%* [(30-28)+31] / 360
= $308
4. The interest expense to be recorded in 2017-
Interest to be recorded in 2017 = Principal * Interest rate * Term of note/360 days
= $42,000 * 8% * (60-33)/360
= $252
5. Journal entries-
Date | Accounts titles and Explanation | Debit ($) | Credit ($) |
2016 | |||
20 April | Merchandise inventory | 40,250 | |
Accounts payable - L | 40,250 | ||
(To record the purchase of inventory on account) | |||
19 May | Accounts payable - L | 40,250 | |
Cash | 5,250 | ||
Notes payable - L | 35,000 | ||
(To record issue of note and amount paid in cash) | |||
8 July | Cash | 80,000 | |
Notes payable - NBR Bank | 80,000 | ||
(To record cash borrowed on note) | |||
17 Aug. | Notes payable - L | 35,000 | |
Interest expense | 875 | ||
Cash | 35,875 | ||
(To record cash paid on issue of note) | |||
5 Nov. | Notes payable - NBR Bank | 80,000 | |
Interest expense | 2,400 | ||
Cash | 82,400 | ||
(To record cash paid on issue of note) | |||
28 Nov. | Cash | 42,000 | |
Notes payable- FB | 42,000 | ||
(To record cash borrowed on note) | |||
31 Dec. | Interest expense | 308 | |
Interest payable | 308 | ||
(To record interest accrued on note) | |||
2017 | |||
27 Jan. | Notes payable- FB | 42,000 | |
Interest payable | 308 | ||
Interest expense | 252 | ||
Cash | 42,308 | ||
(To record cash paid on note) |
Problem 11-1A Part 1 Required: 1. Determine the maturity date for each of the three notes...
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> Cash to Jan 27, 2017, is actually 42,560, everything else is right though!!!
Kai -A Fri, Nov 26, 2021 11:58 PM