Question

GL0901 - Based on Problem 9-1A LO C2, P1 The January 1, 2016 trial balance for the Nguyen Company is found on the trial balance tab. The beginning balances are assumed. Hall Co. entered into the following transactions involving short-term liabilities in 2016 and 2017. (Use 360 days a year.) 2016 Apr. 20 Purchased $54,750 of merchandise on credit from Lee, terms are n/30. Hall uses the perpetual inventory system. May 19 Replaced the April 20 account payable to Lee with a 90-day, $36,000 note bearing 10% annual interest along with paying $18,750 in cash. July 8 Borrowed $96,000 cash from CDR Bank by signing a 120-day, 6% interest-bearing note with a face value of $96,000. Aug. 17 Paid the amount due on the note to Lee at the maturity date. Nov. 5 Paid the amount due on the note to CDR Bank at the maturity date. Nov. 28 Borrowed $51,000 cash from Austin Bank by signing a 60-day, 12% interest-bearing note with a face value of $51,000. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Austin Bank. 2017 Jan. 27 Paid the amount due on the note to Austin Bank at the maturity date.

1

Apr. 20. Purchased $54,750 of merchandise on credit from Lee, terms n∕30. Hall uses the perpetual inventory system.

2

May 19. Replaced the April 20 account payable to Lee with a 90-day, $36,000 note bearing 10% annual interest along with paying $18,750 in cash.

3

Jul. 8. Borrowed $96,000 cash from CDR Bank by signing a 120-day, 6% interest-bearing note with a face value of $96,000.

4

Aug. 17. Paid the amount due on the note to Lee at the maturity date.

5

Nov. 5. Paid the amount due on the note to CDR Bank at the maturity date.

6

Nov. 28. Borrowed $51,000 cash from Austin Bank by signing a 60-day, 8% interest-bearing note with a face value of $51,000.

7

Dec. 31 Recorded an adjusting entry for accrued interest on the note to Austin Bank.

Note :  = journal entry has been entered

Enter the principal amount, interest rate, and number of days of interest to be recorded for each note. Verify that interest expense agrees with your journal entries and the trial balance.

UnadjustedAdjustedPost-closing

	Hall Co. Calculation of interest expense August 17 - Lee note: Principal Interest rate Number of days' interest to be recorded in 2016 Total interest expense - 2016 $0

Prepare the January 27, 2017 journal entry to record the payment of the Austin note at maturity.  Nguyen Company does NOT prepare reversing entries.

UnadjustedAdjustedPost-closing

	Date Account title Debit Credit 1/27/2017

Here are the balances in Accounts and Notes payable based on your journal entries:

UnadjustedAdjustedPost-closing

	Hall Co. Schedule of Accounts Payable Total accounts payable $0 Hall Co. Schedule of Notes Payable Total notes payable $0

Answer 1

Calculation of interest expense for 2016:

Particulars	Amount	Number of days	Rate of interest	Interest
Note to Lee	$36,000.00	90	10%	$900.00
CDR Bank Note	$96,000.00	120	6%	$1,920.00
Austin bank note(34 days for 2016)	$51,000.00	34	8%	$385.33
Total				$3,205.33

Austin bank note taken for 60 days on November 28. So, number of days the note is unpaid in 2016 are 3 days in november and 31 days in december =31+3=34 days.

Balance days of note payable in 2017 are 60-34 days=26 days

Journal entry to record note payable repayment in 2017:

Date	Account title and explanation	Debit	Credit	Remarks
	Interest expense a/c Dr	$385.33		(51000*8%*34)/360
	Interest payable a/c Dr	$294.67		(51000*8%*26)/360
	8% Note payable to Austin bank a/c Dr	$51,000.00		680
	To Cash		$51,680.00
	(Being repayment of note payable and interest expense )

Schedule of Accounts payable	Amount
Total Accounts payable	$0.00
All the notes payable are repaid except for the note with Austin bank.
Scheule of Notes payable	Amount
Austin bank 8% note payable	$51,000.00