Answer:
The journal entries should be:
April 20, 2016, purchased merchandise on account from Locust:
Dr Merchandise inventory 40,250
Cr Accounts payable 40,250
May 19, 2016, made a partial payment to Locust and issued a note payable:
Dr Accounts payable 40,250
Cr Cash 5,250
Cr Notes payable - Locust 35,000
July 8, 2016, borrowed $80,000 from NBR bank signing a 120 day note:
Dr Cash 80,000
Cr Notes payable - NBR bank 80,000
August 17, 2016, paid the notes payable to Locust:
Dr Notes payable - Locust 35,000
Dr Interest expense 875 (= 35,000 x 10% x 3/12)
Cr Cash 35,875
November 5, 2016, paid the bank loan:
Dr Notes payable - NBR bank 80,000
Dr Interest expense 2,400 (= 80,000 x 9% x 4/12)
Cr Cash 82,400
November 28, 2016, borrowed $42,000 from Fargo bank signing a 60 day note:
Dr Cash 42,000
Cr Notes payable - Fargo bank 42,000
December 31, 2016, recorded accrued interest owed to Fargo bank:
Dr Interest expense 308
Cr Accrued interest payable - Fargo bank 308 (= 42,000 x 8% x 33/360)
January 27, 2017, paid the bank loan:
Dr Notes payable - Fargo bank 42,000
Dr Interest expense 252 [= (42,000 x 8% x 2/12) - 308]
Dr Interest payable - Fargo bank 308
Cr Cash 42,560
