Solution:
1) Maturity date
locust NBR fargo
date of the note 19-May 8-Jul 28-Nov
term of note 90 120 60
maturity date 17-Aug 5-Nov 27-Jan
2) interest due at maturity
principal * Rate * time = interest
locust 35,000 * 8% * 90/360 = 700
NBR 63,000 * 11% * 120/360 = 2310
Fargo 33,000 * 7% * 60/360 = 385
3) Amount in adjusting entry
33,000*7%*33/360
= 211.75
principal * Rate * time = interest
interest to be acccrued 33,000 * 7% * 33/360 = 211.75
4) interest expense to be recorded in 2017
198
principal * Rate * time = interest
interest to recorded in 2018 33,000 * 7% * 27/360 = 173.25
Journal entries
Date Accounting titles & Explanations Debit Credit
2016
20-Apr inventory 38,000
Accounts payable 38,000
19-May Accounts payable 38,000
cash 3,000
notes payable 35,000
8-Jul Cash 63,000
notes payable 63,000
17-Aug notes payable 35,000
interest expense 700
cash 35,700
5-Nov notes payable 63,000
interest expense 2,310
cash 65,310
28-Nov Cash 33,000
notes payable 33,000
31-Dec interest expense 211.75
interest payable 211.75
2017
27-Jan notes payable 33,000
interest payable 211.75
interest expense 173.25
cash 33,385
