Tytus Co. entered into the following transactions involving short-term liabiliti
ID: 2348086 • Letter: T
Question
Tytus Co. entered into the following transactions involving short-term liabilities in 2010 and 2011.2010
Apr. 20
Purchased $39,000 of merchandise on credit from Frier, terms are 1/10, n/30. Tytus uses the perpetual inventory system.
May 19
Replaced the April 20 account payable to Frier with a 90-day, $30,000 note bearing 8% annual interest along with paying $9,000 in cash.
July 8
Borrowed $60,000 cash from Community Bank by signing a 120-day, 11% interest-bearing note with a face value of $60,000.
__?__ Paid the amount due on the note to Frier at the maturity date.
__?__ Paid the amount due on the note to Community Bank at the maturity date.
Nov. 28
Borrowed $24,000 cash from UMB Bank by signing a 60-day, 8% interest-bearing note with a face value of $24,000.
Dec. 31 Recorded an adjusting entry for accrued interest on the note to UMB Bank.
2011
__?__ Paid the amount due on the note to UMB Bank at the maturity date.
1. Determine the maturity date for each of the three notes described.
2. Determine the interest due at maturity for each of the three notes.
3. Determine the interest expense to be recorded in the adjusting entry at the end of 2010.
4. Determine the interest expense to be recorded in 2011.
5. Prepare journal entries for all the preceding transactions and events for years 2010 and 2011.
Explanation / Answer
sol Montag Co. entered into the following transactions involving short-term liabilities in 2008 and 2009. 2008 Apr. 20 Purchased $48,250 of merchandise on credit from Locust, terms are 1/10, n/30. Montag uses the perpetual inventory system. May 19 Replaced the April 20 account payable to Locust with a 120-day, $39,000 note bearing 9% annual interest along with paying $9,250 in cash. July 8 Borrowed $120,000 cash from National Bank by signing a 120-day, 8.5% interest-bearing note with a face value of $100,000. (is it really supposed to be $120,000??--this is what I assumed) Sept. 19 Paid the amount due on the note to Locust at the maturity date. Nov. 8 Paid the amount due on the note to National Bank at the maturity date. Nov. 28 Borrowed $60,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $60,000. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2009 Jan. 28 Paid the amount due on the note to Fargo Bank at the maturity date. Determine the interest expense to be recorded in the adjusting entry at the end of 2008. (Enter 0 if no interest is to be accrued. Assume a 360-day year. Omit the "$" sign in your response.) Accrued interest expense Locust $1,170 Ntl Bk $3,400 Fargo$400 total = $4,970 Determine the interest expense to be recorded in 2009. (Omit the "$" sign in your response.) Interest on Fargo note in 2009 $400
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