Problem 11-1A (45 minutes)

		Locust	NBR Bank	Fargo Bank
1.	Maturity dates
	Date of the note	May 19	July 8	Nov. 28
	Term of the note (in days)	90	120	60
	Maturity date	Aug. 17	Nov. 5	Jan. 27
2.	Interest due at maturity
	Principal of the note	$35,000	$80,000	$42,000
	Annual interest rate	10%	9%	8%
	Fraction of year	90/360	120/360	60/360
	Interest expense	$ 875	$ 2,400	$ 560
3.	Accrued interest on Fargo note at the end of Year 1
	Total interest for note			$ 560
	Fraction of term in Year 1			33/60
	Accrued interest expense			$ 308
4.	Interest on Fargo note in Year 2
	Total interest for note			$ 560
	Fraction of term in Year 2			27/60
	Interest expense in Year 2			$ 252

Problem 11-1A (Concluded)

5.

Apr. 20	Merchandise Inventory	40,250
	Accounts PayableLocust		40,250
	Purchased merchandise on credit.

May 19	Accounts PayableLocust	40,250
	Cash		5,250
	Notes PayableLocust		35,000
	Paid $5,250 cash and gave a 90-day, 10% note to extend due date on account.

July 8	Cash	80,000
	Notes PayableNBR		80,000
	Borrowed cash with a 120-day, 9% note.

Aug. 17	Interest Expense	875
	Notes PayableLocust	35,000
	Cash		35,875
	Paid note with interest.

Nov. 5	Interest Expense	2,400
	Notes PayableNBR	80,000
	Cash		82,400
	Paid note with interest.

28	Cash	42,000
	Notes PayableFargo Bank		42,000
	Borrowed cash with 60-day, 8% note.

Dec. 31	Interest Expense	308
	Interest Payable		308
	Accrued interest on note payable.

Jan. 27	Interest Expense	252
	Notes PayableFargo Bank	42,000
	Interest Payable	308
	Cash		42,560
	Paid note with interest.