year 1 april 20 purchased $53,250 of merchandise on credit from wilson, terms n/30. may 19 replaced the…
year 1 april 20 purchased $53,250 of merchandise on credit from wilson, terms n/30. may 19 replaced the april 20 account payable to wilson with a 90 - day, 6%, $37,000 note payable along with paying $16,250 in cash. july 8 borrowed $87,000 cash from nmr bank by signing a 120 - day, 6%, $87,000 note payable. august 17 paid the amount due on the note to wilson at the maturity date. november 5 paid the amount due on the note to nmr bank at the maturity date. november 28 borrowed $81,000 cash from rochester bank by signing a 60 - day, 12%, $81,000 note payable. december 31 recorded an adjusting entry for accrued interest on the note to rochester bank. year 2 january 27 paid the amount due on the note to rochester bank at the maturity date. requirement prepare the journal entries related to notes and accounts payable. hint: use the accuracy of your entries. view transaction list journal entry worksheet < 1 2 3 4 5 6 7 april 20. purchased $53,250 of merchandise on credit from wilson, terms n/30. note: enter debits before credits date account title debit credit
Answer
Explanation:
Step1: Record April 20 purchase
Debit Merchandise Inventory $53,250; Credit Accounts Payable - Wilson $53,250.
Step2: Record May 19 replacement
Debit Accounts Payable - Wilson $53,250; Credit Cash $16,250, Credit Notes Payable - Wilson $37,000.
Step3: Record July 8 borrowing
Debit Cash $87,000; Credit Notes Payable - NMR Bank $87,000.
Step4: Record August 17 payment to Wilson
First, calculate interest on Wilson note. Interest = $37,000×6%×90/360 = $555. Debit Notes Payable - Wilson $37,000, Debit Interest Expense $555; Credit Cash $37,555.
Step5: Record November 5 payment to NMR Bank
Interest on NMR Bank note = $87,000×6%×120/360 = $1,740. Debit Notes Payable - NMR Bank $87,000, Debit Interest Expense $1,740; Credit Cash $88,740.
Step6: Record November 28 borrowing from Rochester Bank
Debit Cash $81,000; Credit Notes Payable - Rochester Bank $81,000.
Step7: Record December 31 adjusting entry for Rochester Bank
Interest accrued = $81,000×12%×33/360 = $891. Debit Interest Expense $891; Credit Interest Payable - Rochester Bank $891.
Step8: Record January 27 payment to Rochester Bank
Total interest = $81,000×12%×60/360 = $1,620. Interest already accrued is $891, so additional interest expense = $1,620 - $891 = $729. Debit Notes Payable - Rochester Bank $81,000, Debit Interest Payable - Rochester Bank $891, Debit Interest Expense $729; Credit Cash $82,620.
Answer:
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| April 20 | Merchandise Inventory | $53,250 | |
| Accounts Payable - Wilson | $53,250 | ||
| May 19 | Accounts Payable - Wilson | $53,250 | |
| Cash | $16,250 | ||
| Notes Payable - Wilson | $37,000 | ||
| July 8 | Cash | $87,000 | |
| Notes Payable - NMR Bank | $87,000 | ||
| August 17 | Notes Payable - Wilson | $37,000 | |
| Interest Expense | $555 | ||
| Cash | $37,555 | ||
| November 5 | Notes Payable - NMR Bank | $87,000 | |
| Interest Expense | $1,740 | ||
| Cash | $88,740 | ||
| November 28 | Cash | $81,000 | |
| Notes Payable - Rochester Bank | $81,000 | ||
| December 31 | Interest Expense | $891 | |
| Interest Payable - Rochester Bank | $891 | ||
| January 27 | Notes Payable - Rochester Bank | $81,000 | |
| Interest Payable - Rochester Bank | $891 | ||
| Interest Expense | $729 | ||
| Cash | $82,620 |