Ranjit was recently hired by Montreal Express Inc. (MEI) to assist its payable clerk in bringing the accounts up to date. Ranjit was asked to record the following transactions: 

August 15, 2020—MEI purchases a new inventory monitoring system. MEI issues a $6,000 non-interest bearing note payable, due on October 15, 2020. 

August 18, 2020—MEI borrows $10,000 from the bank by way of demand note. MEI pledges its accounts receivable as security and authorizes the bank to take the interest payments from its bank account. Interest is payable on the last day of each month at 4% per annum. 

August 21, 2020— MEI purchases $8,000 inventory on account. The terms offered are 3/10 net 45.

September 20, 2020—MEI purchases a waste management system. MEI issues an $8,000, non-interest bearing note payable due on September 20, 2021. 

September 23, 2020—MEI purchases $3,000 in inventory on account. The terms offered are 3/10 net 45. 

September 24, 2020—Ranjit pays the August 21 and September 23 invoices. 

September 30, 2020—Ranjit accrues for unbilled utilities totalling $1,700. 

Other information 

■ MEI uses the gross method to record accounts payable. 

■ MEI’s year-end is December 31 and in-house, interim statements are normally prepared on a monthly basis. 

■ MEI’s latest interim statements are for the period ended July 31, 2020. The necessary accruals were made at that time, except that MEI only records depreciation expense at year-end. 

■ The market rate of interest for MEI’s unsecured short-term borrowings is 5%. 

Required:

Prepare journal entries to record the documented events and the necessary accruals for the months of August and September. Compute interest accruals based on the number of days, rather than months.