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 inventory System. 19 Replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 8 annual interest along with paying $2,500 in cash 8 Borrowed $60,000 cash from NBR Bank by signing a 120-day, 118 interest-bearing note with a face value of $60,000 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. May July Nov. 28 Borrowed $27,000 cash from Fargo Bank by signing a 60-day, 7 interest-bearing note with a face value of $27,000 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 Required: 1. Determine the maturity date for each of the three notes described. Locust NBR Bank Fargo Bank Maturity date

Answer 1

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	60,000	*	11%	*	120/360	=	2200
	Fargo	27,000	*	7%	*	60/360	=	315
3)	Amount in adjusting entry
				Fargo Bank
			principal	*	Rate	*	time	=	interest
interest to be acccrued in 2016			27,000	*	7%	*	33/360	=	173
4)	interest expense to be recorded in 2017
			principal	*	Rate	*	time	=	interest
interest to recorded in 2018			27,000	*	7%	*	27/360	=	142
	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				60,000
		notes payable					60,000
	17-Aug	notes payable				35,000
		interest expense				700
		cash					35,700
	5-Nov	notes payable				60,000
		interest expense				2,200
		cash					62,200
	28-Nov	Cash				27,000
		notes payable					27,000
	31-Dec	interest expense				173
		interest payable					173
	2017
	27-Jan	notes payable				27,000
		interest payable				173
		interest expense				142
		cash					27,315