required information the following information applies to the questions displayed below. tyrell company…
required information the following information applies to the questions displayed below. tyrell company entered into the following transactions involving short - term liabilities. year 1 april 20 purchased $35,000 of merchandise on credit from locust, terms n/30. may 19 replaced the april 20 account payable to locust with a 90 - day, 8%, $35,000 note payable along with paying $0 in cash. july 8 borrowed $54,000 cash from nbr bank by signing a 120 - day, 11%, $54,000 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. november 28 borrowed $21,000 cash from fargo bank by signing a 60 - day, 9%, $21,000 note payable. december 31 recorded an adjusting entry for accrued interest on the note to fargo bank. year 2 __?__ paid the amount due on the note to fargo bank at the maturity date. 5. prepare journal entries for all the preceding transactions and events. note: do not round your intermediate calculations. view transaction list journal entry worksheet
Answer
Explanation:
Step1: Record April 20 purchase
Debit Merchandise Inventory $35000$, Credit Accounts Payable - Locust $35000$.
Step2: Record May 19 replacement
Debit Accounts Payable - Locust $35000$, Credit Notes Payable - Locust $35000$.
Step3: Record July 8 borrowing
Debit Cash $54000$, Credit Notes Payable - NBR Bank $54000$.
Step4: Calculate Locust note maturity date
May has 31 - 19=12 days, June has 30 days, July has 31 days, 12 + 30+31 = 73 days, 90 - 73 = 17, so maturity is August 17.
Step5: Record Locust note payment on August 17
Interest = $35000\times0.08\times\frac{90}{360}=700$. Debit Notes Payable - Locust $35000$, Debit Interest Expense $700$, Credit Cash $35700$.
Step6: Calculate NBR Bank note maturity date
July has 31 - 8 = 23 days, August has 31 days, September has 30 days, October has 31 days, 23+31 + 30+31=115 days, 120 - 115 = 5, so maturity is November 2.
Step7: Record NBR Bank note payment on November 2
Interest = $54000\times0.11\times\frac{120}{360}=1980$. Debit Notes Payable - NBR Bank $54000$, Debit Interest Expense $1980$, Credit Cash $55980$.
Step8: Record November 28 borrowing
Debit Cash $21000$, Credit Notes Payable - Fargo Bank $21000$.
Step9: Calculate accrued interest for Fargo Bank note on December 31
November 28 - December 31 is 33 days. Interest = $21000\times0.09\times\frac{33}{360}=173.25$. Debit Interest Expense $173.25$, Credit Interest Payable - Fargo Bank $173.25$.
Step10: Calculate Fargo Bank note maturity date
November 28 - December 31 is 33 days, 60 - 33 = 27, so maturity is January 27 of Year 2.
Step11: Record Fargo Bank note payment on January 27 of Year 2
Interest for remaining period = $21000\times0.09\times\frac{27}{360}=141.75$. Total interest = $173.25+141.75 = 315$. Debit Notes Payable - Fargo Bank $21000$, Debit Interest Payable - Fargo Bank $173.25$, Debit Interest Expense $141.75$, Credit Cash $21315$.
Answer:
| Date | Account Titles and Explanation | Debit | Credit |
|---|---|---|---|
| April 20, Year 1 | Merchandise Inventory | 35000 | |
| Accounts Payable - Locust | 35000 | ||
| May 19, Year 1 | Accounts Payable - Locust | 35000 | |
| Notes Payable - Locust | 35000 | ||
| July 8, Year 1 | Cash | 54000 | |
| Notes Payable - NBR Bank | 54000 | ||
| August 17, Year 1 | Notes Payable - Locust | 35000 | |
| Interest Expense | 700 | ||
| Cash | 35700 | ||
| November 2, Year 1 | Notes Payable - NBR Bank | 54000 | |
| Interest Expense | 1980 | ||
| Cash | 55980 | ||
| November 28, Year 1 | Cash | 21000 | |
| Notes Payable - Fargo Bank | 21000 | ||
| December 31, Year 1 | Interest Expense | 173.25 | |
| Interest Payable - Fargo Bank | 173.25 | ||
| January 27, Year 2 | Notes Payable - Fargo Bank | 21000 | |
| Interest Payable - Fargo Bank | 173.25 | ||
| Interest Expense | 141.75 | ||
| Cash | 21315 |