Question

GL901 - Based on Problem 9-1A LO C2, P1 The January 1, Year 1 trial balance for the Gonzalez Company is found on the trial balance tab. The beginning balances are assumed. Wright Co. entered into the following transactions involving short-term liabilities. (Use 360 days a year.) Year 1 Apr. May July Aug. Nov. 20 Purchased $42,250 of merchandise on credit from Hall, terms n/30. 19 Replaced the April 20 account payable to Hall with a 90-day, 8%, $39,000 note payable along with paying $3,250 in cash. 8 Borrowed $93,000 cash from NOR Bank by signing a 120-day, 123, 593, 000 note payable. 17 Paid the amount due on the note to Mall at the maturity date. 5 Paid the amount due on the note to MOR Bank at the saturity date. 28 Borrowed $54,000 cash from Sacramento Bank by signing a 60-day, 12%, $54,000 note payable. 31 Recorded an adjusting entry for accrued interest on the note to Sacramento Bank. Dec. Jan. 27 Paid the amount due on the note to Sacramento Bank at the maturity date. Requirement General Journal General Ledger Trial Balance Schedule of Payables Calculation of Interest Year 2 payment Prepare the January 27, Year 2 journal entry to record the payment of the Sacramento note at maturity. Gonzalez Company does NOT prepare reversing entries Date 1/27/Year 2 Account title interest expense Credit Interest payable Notes payable - Sacramento Cash Debit 4681 612 54,000 55,080 < Calculation of Interest

Answer 1

Credit Debit $42,250 $42,250 $42,250 $3,250 $39,000 $93,000 $93,000 $39,000 $780 $39,780 Ans a: Journal Entry in Year 1 Date Particulars April 20, Year 1 Merchandise inventory Accounts Payable (Being purchase of merchandise accounted) May 19, Year 1 Accounts Payable Cash Notes Payable (Being part payment made and notes payable given) July 8, Year 1 Cash Notes Payable (Being amount borrowed from NBR Bank) Aug 17 , Year 1 Notes Payable Interest (Note a) Cash (Being amount refunded Locust on maturity) Nov 5, Year 1 Notes Payable Interest (Note b) Cash (Being amount refunded NJR Bank on maturity) Nov 28, Year 1 Cash Notes Payable (Being amount borrowed from Sacramento Bank) Dec 31, Year 1 Interest (Note c) Interest Payable (Being interest provision entry on Notes Payable Accounted) Ans b: Journal Entry in Year 2 Date Particulars Jan 27, Year 2 Interest (Note d) Interest Payable Notes Payable Cash (Being payment of notes payable Sacramento Bank made on Maturity) $93,000 $3,720 $96,720 $54,000 $54,000 $594.00 $594.00 Credit Debit $486.00 $594.00 $54,000 $55,080

Working Note (a) $39,000 8% 90 $780.00 (b) $93,000 12% 120 $3,720.00 Calculation of Interest Exp Year 1 August 17- Hall Note Principal Interest Rate Number of days be To Recorded in Year 1 Amount [($39000*8%)360*90] November 5- NJR Bank Principal Interest Rate Number of days be To Recorded in Year 1 Amount [($93000*12%)360*120] December 31- Sacramento Bank Principal Interest Rate Number of days be To Recorded in Year 1 [November 28 December 31] Amount [($54000*12%)360*33] Total Interest Expense for Year 1 Year 2 January 27-Sacramento Bank Principal Interest Rate Number of days be To Recorded in Year 2 [January 1 January 27] Amount [($54000*12%)360*27] $54,000 12% 33 $594.00 $5,094.00 (d) $54,000 12% 27 $486.00