Question

year 1 april 20 purchased $53,250 of merchandise on credit from wilson, terms n/30. may 19 replaced the april 20 account payable to wilson with a 90 - day, 6%, $37,000 note payable along with paying $16,250 in cash. july 8 borrowed $87,000 cash from nmr bank by signing a 120 - day, 6%, $87,000 note payable. august 17 paid the amount due on the note to wilson at the maturity date. november 5 paid the amount due on the note to nmr bank at the maturity date. november 28 borrowed $81,000 cash from rochester bank by signing a 60 - day, 12%, $81,000 note payable. december 31 recorded an adjusting entry for accrued interest on the note to rochester bank. year 2 january 27 paid the amount due on the note to rochester bank at the maturity date. requirement prepare the journal entries related to notes and accounts payable. hint: use the accuracy of your entries. view transaction list journal entry worksheet < 1 2 3 4 5 6 7 april 20. purchased $53,250 of merchandise on credit from wilson, terms n/30. note: enter debits before credits date account title debit credit

Explanation:

Step1: Record April 20 purchase

Debit Merchandise Inventory $53,250; Credit Accounts Payable - Wilson $53,250.

Step2: Record May 19 replacement

Debit Accounts Payable - Wilson $53,250; Credit Cash $16,250, Credit Notes Payable - Wilson $37,000.

Step3: Record July 8 borrowing

Debit Cash $87,000; Credit Notes Payable - NMR Bank $87,000.

Step4: Record August 17 payment to Wilson

First, calculate interest on Wilson note. Interest = $37,000×6%×90/360 = $555. Debit Notes Payable - Wilson $37,000, Debit Interest Expense $555; Credit Cash $37,555.

Step5: Record November 5 payment to NMR Bank

Interest on NMR Bank note = $87,000×6%×120/360 = $1,740. Debit Notes Payable - NMR Bank $87,000, Debit Interest Expense $1,740; Credit Cash $88,740.

Step6: Record November 28 borrowing from Rochester Bank

Debit Cash $81,000; Credit Notes Payable - Rochester Bank $81,000.

Step7: Record December 31 adjusting entry for Rochester Bank

Interest accrued = $81,000×12%×33/360 = $891. Debit Interest Expense $891; Credit Interest Payable - Rochester Bank $891.

Step8: Record January 27 payment to Rochester Bank

Total interest = $81,000×12%×60/360 = $1,620. Interest already accrued is $891, so additional interest expense = $1,620 - $891 = $729. Debit Notes Payable - Rochester Bank $81,000, Debit Interest Payable - Rochester Bank $891, Debit Interest Expense $729; Credit Cash $82,620.

Answer:

Date	Account Title	Debit	Credit
	Accounts Payable - Wilson		$53,250
May 19	Accounts Payable - Wilson	$53,250
	Cash		$16,250
	Notes Payable - Wilson		$37,000
July 8	Cash	$87,000
	Notes Payable - NMR Bank		$87,000
August 17	Notes Payable - Wilson	$37,000
	Interest Expense	$555
	Cash		$37,555
November 5	Notes Payable - NMR Bank	$87,000
	Interest Expense	$1,740
	Cash		$88,740
November 28	Cash	$81,000
	Notes Payable - Rochester Bank		$81,000
December 31	Interest Expense	$891
	Interest Payable - Rochester Bank		$891
January 27	Notes Payable - Rochester Bank	$81,000
	Interest Payable - Rochester Bank	$891
	Interest Expense	$729
	Cash		$82,620