Question

Required information [The following information applies to the questions displayed below.] Part 4 of 5 Tyrell Co. entered into the following transactions involving short-term liabilities. 1.53 points Year 1 Apr. 20 Purchased $38,500 of merchandise on credit from Locust, terms n/30. May 19 Replaced the April 20 account payable to Locust with a 90-day, 7%, $35,000 note payable along with paying $3,500 in cash. July 8 Borrowed $69,000 cash from NBR Bank by signing a 120-day, 11%, $69,000 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, 8%, $33,000 note payable. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. eBook Print Year 2 __?__ Paid the amount due on the note to Fargo Bank at the maturity date. 4. Determine the interest expense recorded in Year 2. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Use 360 days a year.) Year end accrual required for: Fargo Bank x Time Principal X Rate = Interest Interest to be recorded in Year 2

Answer 1

4. Answer:

Year End accrual Required For:	Fargo Bank
	Principal	x	Rate	x	Time	=	Interest
Interest to be recorded in Year 2	$33,000	x	8%	x	27/360	=	$198

Explanation:

Borrowed from Fargo bank on Nov.28, Year 1. 60-days note.

So, Maturity date is January 27, Year 2.

Hence, Interest expense to be recorded for 27 days [from Jan.1, Year 2 to Jan.27, Year 2]

Times = 27 days ÷ 360 days = 0.075