Required information Problem 11-1A Short-term notes payable transactions and ent

Question

Required information Problem 11-1A Short-term notes payable transactions and entries LO P1 The following information applies to the questions displayed below Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017 2016 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. $69,000. 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 $24,000 cash from Fargo Bank by signing a 60-day, 9% interest-bearing note with a face value of Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2017 $24,000. --?- Paid the amount due on the note to Fargo Bank at the maturity date.

Explanation / Answer

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 69,000 * 10% * 120/360 = 2300 Fargo 24,000 * 9% * 60/360 = 360 3) Amount in adjusting entry 24,000*9%*33/360 198 Fargo Bank principal * Rate * time = interest interest to be acccrued in 2016 24,000 * 9% * 33/360 = 198 4) interest expense to be recorded in 2017 198 principal * Rate * time = interest interest to recorded in 2018 24,000 * 9% * 27/360 = 162 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 69,000 notes payable 69,000 17-Aug notes payable 35,000 interest expense 700 cash 35,700 5-Nov notes payable 69,000 interest expense 2,300 cash 71,300 28-Nov Cash 24,000 notes payable 24,000 31-Dec interest expense 198 interest payable 198 2017 27-Jan notes payable 24,000 interest payable 198 interest expense 162 cash 24,360

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