Question

The January 1, Year 1 trial balance for the Tyrell Company is found on the trial balance tab. The beginning balances are assumed. Tyrell Co. entered into the following transactions involving short-term liabilities in Year 1 and Year 2.
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.
Aug. 17 Paid the amount due on the note to Locust at the maturity date.
Nov. 5 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
Jan. 27 Paid the amount due on the note to Fargo Bank at the maturity date.
Requirement General General Trial Schedule of Calculation of Year 2
Journal Ledger Balance Payables Interest Payment
1. General Journal tab- Prepare the 2016 journal entries related to the notes and accounts payable of Tyrell Co
2. Calculation of interest tab - Use the interest formula (P x Rx T) to verify the amount of interest recorded in your entries. Verify that total interest expense agrees with the trial balance.
3. Year 2 payment tab - Prepare the January 27, 2017 entry to record the re-payment of the note at maturity

Answer 1

Answer: Please see explanatory column

Explanation:

Tyrell Company for 2016

Journal to record the purchase of merchandise inventory

Date       Account Title                                    Debit          Credit

April 20  Merchandise  inventory                  $40,250    

2016       Accounts payable - Locust                                 $40250

Journal to record the replacement of account with 10% notes payable

Date       Account Title                                    Debit          Credit

March 19    Accounts payable - Locust         $40,250    

2016    10%notes payable                                               $35,000

   Cash                                                                                  $5,250

Journal to record the Borrowing of  $80,000 cash in 120-days at 9%,

Date       Account Title                                    Debit          Credit

July 8     Cash                                             $80,000    

2016       9%notes payable                                              $80,000

Journal to record the 10%, notes payable at maturity date

Date       Account Title                                    Debit          Credit

Aug 17    10% notes payable                         $35,000   

2016                     interest expense                      $875

                  Cash                                                               $35,875

Using Interest = P X R X T

      = 35,000 X 10% X 90/360=$875

Journal to record the 9%, notes payable at maturity date

Date       Account Title                                    Debit          Credit

Nov 5   9% notes payable                         $80,000   

2016                     interest expense              $2,400

                  Cash                                                               $82,400

Using Interest = P X R X T

      = 80,000 X 9% X 120/360=$2,400

Journal to borrowing of 42,000 for 60 days at 8% interest payable at maturity date

Date       Account Title                                    Debit          Credit

Nov 28    Cash                                           $42,000   

2016            8% notes payable                                         $42,000

Journal to record the interst accrued on the notes  payable

Date       Account Title                                    Debit          Credit

Dec 31     Interest expense                         $308   

   2016           interest payable                                               $308

                 

Using Interest = P X R X T

      = 42,,000 X 8% X 33/360=$308

33 days because the note payable was issued on November 28 but interest was accrued on December 31 making the  accrued interest expense to be calculated for  33 days

Tyrell Company for 2017

Journal to record the payment of 8%  payable at maturity date

Date       Account Title                                    Debit          Credit

Jan 31     8%notes payable                      $42,000  

2017                    interest payable                 $308

Interest expense                                            $252

   Cash                                                                              $42,560

                 Using Interest = P X R X T

      = 42,,000 X 8% X 27/360=$252

27 days because from december to january 27th,