Montag Co. entered into the following transactions involving short-term liabilities in 2010 and 2011.
Apr. 20 Purchased $48,250 of merchandise on credit from Locust, terms are 1/10, n/30. Montag uses the perpetual inventory system.
May 19 Replaced the April 20 account payable to Locust with a 120-day, $39,000 note bearing 9% annual interest along with paying $9,250 in cash.
July 8 Borrowed $120,000 cash from National Bank by signing a 120-day, 8.5% interest-bearing note with a face value of $120,000.
? Paid the amount due on the note to Locust at the maturity date.
? Paid the amount due on the note to National Bank at the maturity date.
Nov. 28 Borrowed $60,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $60,000.
Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank.
? Paid the amount due on the note to Fargo Bank at the maturity date.
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 2010.
4. Determine the interest expense to be recorded in 2011.
5. Prepare journal entries for all the preceding transactions and events for years 2010 and 2011.