Montag Co. entered into the following transactions involving short-term liabilities in 2010 and 2011. 2010 Apr. 20

Question:

Montag Co. entered into the following transactions involving short-term liabilities in 2010 and 2011.
2010
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 of $120,000.
? Paid the amount due on the note to Locust at the date.
? Paid the amount due on the note to National Bank at the date.
Nov. 28 Borrowed $60,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a of $60,000.
Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
2011
? Paid the amount due on the note to Fargo Bank at the date.
Required
1. Determine the date for each of the three notes described.
2. Determine the interest due at for each of the three notes. (Assume a 360-day year.)
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.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...