Tyrell Co entered into the following transactions involving short-term liabiliti
ID: 2581643 • Letter: T
Question
Tyrell Co entered into the following transactions involving short-term liabilities in 2016 and 201n 2016 Apr. 29 Purchased $39,500 of merchandise on credit from Locust, terms n/30 . Tyrell uses the perpetual inventory system. annual interest along with paying $4,500 in cash a face value of $63,000 19 Replaced the April 20 account payableto Locustwith a 90-day, $35,000 note bearing 7% - , July 8 Borrowed $63,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with ?-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 $36,000 cash from Fargo Bank by signing a 60-day, 7% interest-bearing note with Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2017 _?- Paid the amount due on the note to Fargo Bank at the maturity date. a face value of $36,000 Required: 1. Determine the maturity date for each of the three notes described. Locust NBR Bank Fargo Bank Maturity date Next>Explanation / Answer
Tyrell Company Loctus NBR Bank Fargo Bank 1) Maturity Date 17-Aug 5-Nov 27-Jan Date of issuing note 19-May 8-Jul 28-Nov Period 90 days 120 days 60 days Calculation of Maturity Date Loctus May= 12 days June= 30 Days July= 31 days Aug=(90-12-30-31) 17 Days NBR Bank July 23 Days Aug 31 Days Sep 30 Days Oct 31 Days Nov=(120-23-31-30-31) 5 Days Fargo Bank Nov 2 Days Dec 31 Days Jan=(60-2-31) 27 Days 2) Interest due at maturity Principal Rate Time Interest amount Locust $ 35,000.00 7% 90 days (35000*7%*(90/360))=612.5 NBR Bank $ 63,000.00 11% 120 days (63000*11%*(120/360))=2310 Fargo Bank $ 36,000.00 7% 60 days (36000*7%*(60/360))=420 3) Interest expense to be recorded in the adjusting entry at the end of 2016 Adjsting entry pass only in case of Fargo Bank because its maturity period is 5th Jan 2017 At the end of Dec 31st 2016 Interest expense =($420*(33/60) ) $ 231.00 To Interest Payable $ 231.00 Days upto Dec 31st=33 days 4) Interest Expense to be recoreded in 2017 Principal Rate Time Interest amount Fargo Bank $ 36,000.00 7% 27 days (36000*7%*(27/360))=$189 5) Prepare journal entries for all preceeding transactions at 31st Dec 2016 Date Particualr Amount (Dr) Amount(Cr) 20-Apr Mercendise Inventory $ 39,500.00 To Accounts Payable-Locust $ 39,500.00 (Being amount of purchase of mercendise) 19-May Accounts Payable-Locust $ 39,500.00 To Cash $ 4,500.00 To 7%Note Payable $ 35,000.00 (Being amount paid $500 and balance by issung note payable) 8-Jul Cash $ 63,000.00 To NBR Bank $ 63,000.00 (Being amount borrowed from NBR bank) 8-Jul NBR Bank $ 63,000.00 To 11% Note Payable $ 63,000.00 (Beng issue of Note Payable to bank) 17-Aug Interest Expense $ 612.50 7% Note Payable $ 35,000.00 To Cash $ 35,612.50 (Being amount of note matured issued to Locust) 5-Nov Interest Expense $ 2,310.00 7% Note Payable $ 63,000.00 To Cash $ 65,310.00 (Being amount of note matured issued to NBR Bank) 28-Nov Cash $ 36,000.00 To Fargo Bank $ 36,000.00 (Being amount borrowed from Fargo bank) 28-Nov Fargo Bank $ 36,000.00 To 7% Note Payable $ 36,000.00 (Being amount of note issued to Fargo bank) 31-Dec Interest Expense $ 231.00 To Interest Payable $ 231.00 (Being amount of interest Payable)
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