Tyrell Co. entered into the following transactions involving short- term liabilities in 2012 and 2013. 2012 Apr.
Question:
Tyrell Co. entered into the following transactions involving short- term liabilities in 2012 and 2013.
2012
Apr. 20 Purchased $ 40,250 of merchandise on credit from Locust, terms are 1/10, n/30. Tyrell uses the perpetual inventory system.
May 19 Replaced the April 20 account payable to Locust with a 90-day, $ 35,000 note bearing 10% annual interest along with paying $ 5,250 in cash.
July 8 Borrowed $ 80,000 cash from National Bank by signing a 120-day, 9% interest- bearing note with a face value of $ 80,000.
___?___ Paid the amount due on the note to Locust at the maturity date.
___?___ Paid the amount due on the note to National Bank at the maturity date.
Nov. 28 Borrowed $ 42,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $ 42,000.
Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
2013
___?___ Paid the amount due on the note to Fargo Bank at the maturity date.
Required
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. (Assume a 360-day year.)
3. Determine the interest expense to be recorded in the adjusting entry at the end of 2012.
4. Determine the interest expense to be recorded in 2013.
5. Prepare journal entries for all the preceding transactions and events for years 2012 and 2013.
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...
Step by Step Answer:
Fundamental accounting principle
ISBN: 978-0078025587
21st edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta