Question

Required information [The following information applies to the questions displayed below.) Tyrell Co. entered into the following transactions involving short-term liabilities. Year 1 Apr. 20 Purchased $35,500 of merchandise on credit from Locust, terms n/30. May 19 Replaced the April 20 account payable to Locust with a 90-day, 9%, $35,000 note payable along with paying $500 in cash. July 8 Borrowed $66,000 cash from NBR Bank by signing a 120-day, 12%, $66,000 note payable. _?_ 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, 7%, $33,000 note payable. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. Year 2 __?_ Paid the amount due on the note to Fargo Bank at the maturity date. Required: 1. Determine the maturity date for each of the three notes described.

Answer 1

Solution as below:
1. Maturity date
Locust: Initial maturity was on May 19 but they have extended this by 90 days and therefore maturity would be 90 days from May 19 and that would be August 18
NBR Bank: 120 days from July 8, and that would be 5th November as July and August have 31 days
Forgo Bank: 60 days from November 28, and that would be 26th January next year as December would have 31 days
2. Interest Payable at maturity
	Principal	Rate	Time( days)		Interest
Locust	35000	9%	90		787.50	(Principal X Rate/360 X Time)
NBR	66000	12%	120		2,640.00	(Principal X Rate/360 X Time)
Forgo	33000	7%	60		385.00	(Principal X Rate/360 X Time)
3. Accrued Interest at the end of year 1 to Forgo Bank
Total Interest Due/ 60 days X number of days till 31st December
385/60*34		=	218.17
4 Interest expense in year 2 to Forgo Bank
(Principal X Rate/360 X Time)
33000 X 7% divided by 360 multiply by 26					=	166.83
5. Journal entries for all transactions
	1	Merchandise		Debit		35500
		Locust		Credit			35500
	2	Locust		Debit		35500
		9% Note Payable		Credit			35000
		Cash		Credit			500
	3	Cash		Debit		66000
		12% Note Payable		Credit			66000
	4	9% Note Payable		Debit		35000
		Interest		Debit		787.5
		Cash		Credit			35787.5
		(Assuming entire interest is paid on maturity)
	5	12% Note Payable		Debit		66000
		Interest		Debit		2640
		Cash		Credit			68640
		(Assuming entire interest is paid on maturity)
	6	Cash		Debit		33000
		7 % Note payable		Credit			33000
	7	Interest		Debit		218.17
		Interest Payable		Credit			218.17
		Or Forgo Bank
	8	7% Note payable		Debit		33000
		Interest Payable		Debit		218.17
		Interest		Debit		166.83
		Cash		Credit			33385
		End of Solution