Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017. 2016:
Apr. 20: Purchased $39,500 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 $4,500 in cash.
July 8: Borrowed $69,000 cash from NBR Bank by signing a 120-day, 12% interest-bearing note with a face value of $69,000.
_ _ _ : Paid the amount due on the note to Locust at the maturity date.
_ _ _: Paid the amount due on the note to NBR Bank at the maturity date.
Nov. 28: Borrowed $24,000 cash from Fargo Bank by signing a 60-day, 6% interest-bearing note with a face value of $24,000.
Dec. 31: Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
2017:
_ _ _: Paid the amount due on the note to Fargo Bank at the maturity date.
Required:
1) Determine the maturity date for each of the three notes described
Locust NBR Bank Fargo Bank
Maturity date May 19, 2016 July 8, 2016 Nov. 28, 2016
2) Keesha Co. borrows $170,000 cash on December 1, 2017, by signing a 90-day, 11% note with a face value of $170,000.
On what day does this note mature?(Assume that February has 28 days)
a) February 24, 2018
b) February 25, 2018
c) February 26, 2018
d) February 27, 2018
e) March 01, 2018
3) What is the amount of interest expense in 2017 and 2018 from this note? (Use 360 days a year)
Total through maturity Interest Expense 2017 Interest Expense 2018
Principal
Rate (%)
Time
Total Interest
4) Prepare journal entries to record a) Issuance of the note
b) accrual of interest at the end of 2017 and
c) payment of the note at maturity.
(Assume no reversing entries are made. Use 360 days a year.)
5) Prepare journal entries to record the following four separate issuances of stock.
a) A corporation issued 4,000 shares of $10 par value common stock for $48,000 cash.
b) A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $35,500. The stock has a $2 per share stated value.
c) A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $35,500. The stock has no stated value.
d) A corporation issued 1,000 shares of $75 par value preferred stock for $110,500 cash.

Tyrell Co.

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

Notes:         Commencement  Maturity Date

Locust          May 19, 2016  -    August 19, 2016

NBR Bank    July 8, 2016 -       November 2, 2016

Fargo Bank  Nov. 28, 2016 -   January 28, 2017

2. The note's maturity date = March 01, 2018

3. The amount of interest expense from this note:

Total through maturity = $4,675

                         Interest Expense 2017     Interest Expense 2018

Principal                    $170,000                      $170,000

Rate (%)                       11%                                11%

Time                            30 days                        60 days

Total Interest            $1,558.33                     $3,116.67

4. Journal Entries to record:

a) Issuance of the notes

December 1, 2017:

Debit Cash Account $170,000

Credit Notes Payable $170,000

To record the issue of a 90-day note bearing 11% annual interest.

b) Accrual of interest at the end of 2017:

December 31:

Debit Interest Expense $1,558.33

Credit Interest Expense Payable $1,558.33

To accrue interest for the year 2017.

c) payment of the note at maturity:

March 1, 2018:

Debit Notes Payable $170,000

Debit Interest Expense Payable $1,558.33

Debit Interest Expense $3,116.67

Credit Cash Account $174,675

To record the payment of the note on maturity with interest.

5. Journal Entries:

a) Debit Cash Account $48,000

Credit Common Stock $40,000

Credit Paid-in Capital In Excess $8,000

To record the issuance of 4,000 shares of $10 for $48,000.

b) Debit Retained Earnings $4,000

Credit Common Stock $4,000

To record the issuance of 2,000 shares of no-par to promoters at a stated value of $2 per share.

c) Debit Retained Earnings $35,500

Credit Common Stock $35,500

To record the issuance of 2,000 shares worth $35,500.

d) Debit Cash Account $110,500

Credit Preferred Stock $75,000

Credit Paid-in Capital In Excess $35,500

To record the issuance of 1,000 shares of $75 par value for $110,500.

Explanation:

a) Calculation of interest:

2017: $170,000 * 11% * 30/360 = $1,558.33

2018: $170,000 * 11% * 60/360 = $3,116.67

b) Interest:

Total through maturity = $4,675

                         Interest Expense 2017     Interest Expense 2018

Principal                    $170,000                      $170,000

Rate (%)                       11%                                11%

Time                            30 days                        60 days

Total Interest            $1,558.33                     $3,116.67