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

Question

Tyrell Co. entered into the following transactions involving short-term liabilities in 2015 and 2016 2015 Apr. 20 Purchased $38,000 of merchandise on credit from Loco, terms n/30. Tyrell uses the perpetual inventory system. May 19 Replaced the April 20 account payable to Loco with a 90-day, $35,000 note bearing 8% annual interest along with paying $3,000 in cash July 8 Borrowed $66,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with a face value of $66,000 Paid the amount due on the note to Loco at the maturity date . Paid the amount due on the note to NBR Bank at the maturity date. Nov. 28 Borrowed $30,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $30,000. Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2016 Paid the amount due on the note to Fargo Bank at the maturity date

Explanation / Answer

Payment will be made to LOCO on August 17 th 2015 as per the modified transaction .

NBR bank's payment will be made on November 5 th 2015.

On 27 th January 2016 payment due to FARGO Bank is made.

Interest will be computed as follows:-

=Principal × Rate × Time :-

=$30,000 × 8% × (34÷365) = 223.5616$.

Note :- Grace period is allowed only in case of bills and hence not considered.

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