Question

Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017. 2016 Apr. 20 Purchased $38,000 of merchandise on credit from Locust, terms 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 7% annual interest along with paying $3,000 in cash. July 8 Borrowed $60,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with a face value of $60,000. __

Answer 1

Missing information:

Amount paid to Locust (interest + principal)

Amount paid to NBR bank (interest + principal)

Answer:

Amount paid to Locust

• interest = $604.11
• principal = $35,000
• total = $35,604.11

Amount paid to NBR bank

• interest = $2,169.86
• principal = $60,000
• total = $62,169.86

Explanation:

Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017.

April 20, 2016 Purchased $38,000 of merchandise on credit from Locust, terms n/30. Tyrell uses the perpetual inventory system.

Dr Merchandise inventory 38,000

    Cr Accounts payable 38,000

May 19, 2016, replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 7% annual interest along with paying $3,000 in cash.

Dr Accounts payable 38,000

    Cr Cash 3,000

    Cr Notes payable 35,000

August 17, 2016, paid the note to Locust with interest ($35,000 x 7% x 90/365)

Dr Notes payable 35,000

Dr Interest expense 604.11

    Cr Cash 35,604.11

July 8. 2016, borrowed $60,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with a face value of $60,000.

Dr Cash 60,000

    Cr Notes payable 60,000

November 5, 2016, paid the note to NBR Bank with interest ($60,000 x 11% x 120/365)

Dr Notes payable 60,000

Dr Interest expense 2,169.86

    Cr Cash 62,169.86