Perfect Systems borrows $160,000 cash on May 15, 2011, by signing a 60-day, 6% note. 1. On what date does this note mature?

Perfect Systems borrows $160,000 cash on May 15, 2011, by signing a 60-day, 6% note.   

1.	On what date does this note mature?
	July 14, 2011

  

2.	Assume the face value of the note equals $160,000, the principal of the loan.

  

(a)	Prepare the journal entries to record issuance of the note. (Omit the "$" sign in your response)

  

Date		General Journal	Debit	Credit
May	15	Cash
		Notes payable

  

(b)	Prepare the journal entries to record payment of the note at maturity. (Use 360 days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response)

  

Date	General Journal	Debit	Credit
July 14	Interest expense
	Notes payable
	Cash

Explanation: 1.

Maturity date = May 15 + 60 days = July 14, 2011.

 
2

Calculation of Interest Expense

Principal	$	160,000
× Interest rate		6	%
× Fraction of year		60/360
Total interest	$	1,600

Tytus Co. entered into the following transactions involving short-term liabilities in 2010 and 2011.

Tytus Co. entered into the following transactions involving short-term liabilities in 2010 and 2011.

  

2010
Apr. 20	Purchased $38,500 of merchandise on credit from Frier, terms are 1/10, n/30. Tytus uses the perpetual inventory system.
May 19	Replaced the April 20 account payable to Frier with a 90-day, $30,000 note bearing 7% annual interest along with paying $8,500 in cash.
July 8	Borrowed $63,000 cash from Community Bank by signing a 120-day, 10% interest-bearing note with a face value of $63,000.
__?__	Paid the amount due on the note to Frier at the maturity date.
__?__	Paid the amount due on the note to Community Bank at the maturity date.
Nov. 28	Borrowed $33,000 cash from UMB Bank by signing a 60-day, 9% interest-bearing note with a face value of $33,000.
Dec. 31	Recorded an adjusting entry for accrued interest on the note to UMB Bank.

  

2011

__?__

Paid the amount due on the note to UMB Bank at the maturity date.

Required:
1.	Determine the maturity date for each of the three notes described.

	Frier	Com. Bank	UMB
Maturity date	Aug. 17	Nov. 5	Jan. 27

Explanation:

Maturity dates

		Frier	Com. Bank	UMB
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.	Determine the interest due at maturity for each of the three notes. (Use 360 days a year. Do not round your intermediate calculations. Omit the "$" sign in your response.)

	Frier	Com. Bank	UMB
Interest due at maturity	$	$	$

Explanation:

Interest due at maturity

  

		Frier			Com. Bank				UMB
Principal of the note		$	30,000		$	63,000			$	33,000
Annual interest rate			7	%		10		%		9	%
Fraction of year			90/360			120/360				60/360
Interest expense		$	525		$	2,100			$	495
3.	Determine the interest expense to be recorded in the adjusting entry at the end of 2010. (Enter 0 if no interest is to be accrued. Use 360 days a year. Do not round your intermediate calculations. Round your final answers to 2 decimal places. Omit the "$" sign in your response.)

  

	Frier	Com Bank	UMB	Total
Accrued interest expense	$	$	$	$

Explanation:

Accrued interest on UMB note at the end of 2010

   

Total interest for note	$	495
Fraction of term in 2010		33/60
Accrued interest expense	$	272.25

4.	Determine the interest expense to be accrued on 12/31 for the UMB Bank note. (Use 360 days a year. Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

     

Interest expense in 2011

$

rev: 09_25_2012

Explanation:

Interest on UMB note in 2011

     

Total interest for note	$	495
Fraction of term in 2011		27/60
Interest expense in 2011	$	222.75

5.	Prepare journal entries for all the preceding transactions and events for years 2010 and 2011. (Use 360 days a year. Do not round your intermediate calculations. Omit the "$" sign in your response.)

  

2010

  

Date	General Journal	Debit	Credit
Apr. 20	Merchandise inventory
	Accounts payable-Frier
May 19	Accounts payable-Frier
	Cash
	Notes payable-Frier
July  8	Cash
	Notes payable-Community
Aug. 17	Interest expense
	Notes payable-Frier
	Cash
Nov. 5	Interest expense
	Notes payable-Community
	Cash
Nov. 28	Cash
	Notes payable-UMB bank
Dec. 31	Interest expense
	Interest payable

2011

  

Date	General Journal	Debit	Credit
Jan. 27	Interest expense
	Notes payable-UMB bank
	Interest payable
	Cash

Explanation:

May 19, 2010

Paid $8,500 cash and gave a 90-day, 7% note to extend due date on account.

July 8, 2010

Borrowed cash with a 120-day, 10% note.

Nov. 28, 2010

Borrowed cash with 60-day, 9% note.