## Friday, 30 November 2012

### 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.