Question

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

Year 1

Apr.		20		Purchased $37,000 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 $2,000 in cash.
July		8		Borrowed $63,000 cash from NBR Bank by signing a 120-day, 11%, $63,000 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 $27,000 cash from Fargo Bank by signing a 60-day, 8%, $27,000 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.

5. Prepare journal entries for all the preceding transactions and events. (Do not round your intermediate calculations.)

• Purchased $37,000 of merchandise on credit from Locust, terms n/30.
• Replaced the April 20 account payable to Locust with a 90-day, 7%, $35,000 note payable along with paying $2,000 in cash.
• Borrowed $63,000 cash from NBR Bank by signing a 120-day, 11%, $63,000 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.
• Borrowed $27,000 cash from Fargo Bank by signing a 60-day, 8%, $27,000 note payable.
• Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
• Paid the amount due on the note to Fargo Bank at the maturity date.

Answer 1

Journal entries

Date	General Journal	Debit	Credit
Apr 20	Merchandise inventory	37000
	Account payable		37000
May 19	Account payable	37000
	7% Notes payable		35000
	Cash		2000
July 8	Cash	63000
	11% Notes payable		63000
Aug 17	Interest expense (35000*7%*90/360)	612.50
	7% Notes payable	35000
	Cash		35612.50
Nov 5	Interest expense (63000*11%*120/360)	2310
	11% Notes payable	63000
	Cash		65310
Nov 28	Cash	27000
	8% Notes payable		27000
Dec 31	Interest expense (27000*8%*33/360)	198
	Interest payable		198
Jan 27	8% Notes payable	27000
	Interest payable	198
	Interest expense	162
	Cash		27360