Chapter 11, Problem 1BPSB

Problem 11-1B

Short-term notes payable transactions and entries PI

Warner Co. entered into the following transactions involving short-term liabilities in 2014 and 2015.

2014

Apr. 22 Purchased $5,000 of merchandise on credit from Fox Products, terms are 1 /10. n/30. Warner uses the perpetual inventory system.

May 23 Replaced the April 22 account payable to Fox Products with a 60-day. S4.600 note bearing 15% annual interest along with paying 5400 in cash.

July 15 Borrowed $12,000 cash from Spring Bank by signing a 120-day, 10% interest-bearing note with a face value of $12,000.

? Paid the amount due on the note to Fox Products at maturity.

? Paid the amount due on the note to Spring Bank at maturity.

Dec. 6 Borrowed $8,000 cash from City Bank by signing a 45-day, 9% interest-bearing note with a face value of $8,000.

31 Recorded an adjusting entry for accrued interest on the note to City Bank.

2015

3 Paid the amount due on the note to City Bank at maturity.

Required

1. Determine the maturity date for each of the three notes described.
2. Determine the interest due at maturity for each of the three notes. (Assume a 360-day year.)
3. Determine the interest expense to be recorded in the adjusting entry at the end of 2014.
4. Determine the interest expense to be recorded in 2015.
5. Prepare journal entries for all the preceding transactions and events for years 2014 and 2015.