Required information [The following information applies to the questions display

Question

Required information [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 $37,500 of merchandise on credit from Locust, terms n/30. Tyrell uses the perpetual May 19 Replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 88 annual July 8 Borrowed $54,000 cash from NBR Bank by signing a 120-day, 10% interest-bearing note with a face value inventory system interest along with paying $2,500 in cash. of $54,000 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 $33,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2017 of $33,000 Paid the amount due on the note to Fargo Bank at the maturity date 5.1 Prepare journal entries for all the preceding transactions and events for 2016. (Do not round your intermediate calculations.)

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 54,000 * 10% * 120/360 = 1800 Fargo 33,000 * 8% * 60/360 = 440 3) Amount in adjusting entry 33,000*8%*33/360 242 principal * Rate * time = interest interest to be acccrued 33,000 * 8% * 33/360 = 242 4) interest expense to be recorded in 2017 198 principal * Rate * time = interest interest to recorded in 2018 33,000 * 8% * 27/360 = 198 Journal entries Date Accounting titles & Explanations Debit Credit 2016 20-Apr inventory 37,500 Accounts payable 37,500 19-May Accounts payable 37,500 cash 2,500 notes payable 35,000 8-Jul Cash 54,000 notes payable 54,000 17-Aug notes payable 35,000 interest expense 700 cash 35,700 5-Nov notes payable 54,000 interest expense 1,800 cash 55,800 28-Nov Cash 33,000 notes payable 33,000 31-Dec interest expense 242 interest payable 242 2017 27-Jan notes payable 33,000 interest payable 242 interest expense 198 cash 33,440

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