Question

Problem 9-1A Short-term notes payable transactions and entries LO P1 Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017 2016 Apr. 20 Purchased $40,250 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 10% annual interest along with paying $5,250 in cash. 150 X 60 July 8 Borrowed $80,000 cash from NBR Bank by signing a 120-day, 9% interest-bearing note with a face value of $80,000. souwx.cf x 120/360 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 $42,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $42,000. 12. 0 x08 y rén Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 42, coux.084 31/360 2017 Paid the amount due on the note to Fargo Bank at the maturity date.

Answer 1

1) Maturity Dates

90 day, 10% $35,000 Note entered on May 19

= May 19 + 90 days = August 17, 2016

120 day, 9% $80,000 note entered on July 8

= Jul 8 + 120 days = November 05, 2016

60 day, 8% $42,000 note entered on Nov 28

= Nov 28 + 60 days = January 27, 2017

2) Interest due at Maturity

90 day, 10% $35,000 Note entered on May 19

= $ 35,000 * 10% * 90/365 = $ 863

120 day, 9% $80,000 note entered on July 8

= $ 80,000 * 9% * 120/ 365 = $ 2367.12

60 day, 8% $42,000 note entered on Nov 28

= $ 42,000 * 8% * 60/365 = $ 552.32

3) Accrued interest due at the end of 2016 = Interest on $ 42,000 note upto Dec 31= $ 42,000 * 8% * 33/365 = $ 303.78

4) Interest expense for 2017 = Interest on $ 42,000 note from Jan 01 to Jan 27 = $ 42,000 * 8% * 27/365 = $ 248.55

5) Journal Entries : Please find the attached picture

Date Credit ($) Debit ($) 40,250 Account Titles and Explanation Apr-20 Purchases Accounts Payable (Credit purchases from Locust) 40,250 40,250 May-19 Accounts Payable Note Payable Cash (Replaced Accounts payable with Note payable and by paying some cash) 35,000 5,250 80,000 Jul-08 Cash Note Payable (Borrowed loan against Note) 80,000 Aug 17, 2016 35,000 863 Note Payble Interest exp Cash (Note to Locust settled) 35,863

Nov 05, 2016 80,000 2,367 Note Payble Interest exp Cash (Note to NBK Bank settled) 82,367 Nov 28, 2016 42,000 Cash Note Payable (Borrowed loan against Note) 42,000 Dec 31, 2016 304 Interest exp Interest Payable (Interest accrued for the year 304 Jan 27, 2017 304 249 Interest Payable Interest exp Cash (Note settled along with interest)