Question

Required information [The following information applies to the questions displayed below.] Tyrell Co. entered into the following transactions involving short-term liabilities in 2017 and 2018. 2017 Apr. 20 Purchased $35,500 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 $500 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, 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. 2018 __?__ Paid the amount due on the note to Fargo Bank at the maturity date.

5.1 Prepare journal entries for all the preceding transactions and events for 2017. (Do not round your intermediate calculations.)

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	*	9%	*	60/360	=	495
3)	Amount in adjusting entry
				Fargo Bank
			principal	*	Rate	*	time	=	interest
interest to be acccrued in 2016			33,000	*	9%	*	33/360	=	272
4)	interest expense to be recorded in 2017
			principal	*	Rate	*	time	=	interest
interest to recorded in 2018			33,000	*	9%	*	27/360	=	223
	Journal entries
	Date	Accounting titles & Explanations				Debit	Credit
	2016
	20-Apr	inventory				35,500
		Accounts payable					35,500
	19-May	Accounts payable				35,500
		cash					500
		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				272
		interest payable					272
	2017
	27-Jan	notes payable				33,000
		interest payable				272
		interest expense				223
		cash					33,495