Question

Required information

Problem 9-1A Short-term notes payable transactions and entries LO P1

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Tyrell Co. entered into the following transactions involving short-term liabilities.

Year 1

Apr.		20		Purchased $40,250 of merchandise on credit from Locust, terms n/30.
May		19		Replaced the April 20 account payable to Locust with a 90-day, 10%, $35,000 note payable along with paying $5,250 in cash.
July		8		Borrowed $80,000 cash from NBR Bank by signing a 120-day, 9%, $80,000 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 $42,000 cash from Fargo Bank by signing a 60-day, 8%, $42,000 note payable.
Dec.		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.

Problem 9-1A Part 4

4. Determine the interest expense recorded in Year 2. (Do not round your intermediate calculations. Use 360 days a year.)

Answer 1

> interest expense to be recorded in Year 2

principal	*	Rate	*	time	=	interest
$42000	*	8%	*	27/360	=	$248.55

..

Interest expense to be recorded in Year 2 = $248.55

.

Working:-

.

Interest = Principal * rate * time

,

Principal = Borrowed amount repay at maturity = $42000

Rate = Interest rate for year = 8%

Time = In year 2, the time accrued =total 60 days, Nov 28 to dec 31 of 33 days are completed in previous year 1, and the remaining year = 60 -33 = 27 days

.

.

Interest = 42000 * 8% * 27 / 365 = 248.55

.

The date of maturity is = January 27, year 2

.

So record $135 as interest expenses, in year 2,