Exercise 4-1

During 2011 and 2012, Data Resources, Inc. engaged in financial transactions that involved short-term liabilities.

1. Using the financial transaction information provided below, determine the following.

a. All three note maturity dates.

b. The interest due on all three notes on the dates they mature, assuming a 360-day year.

c. The interest expense for the 2011 year-end adjusting entry.

d. For distinguished performance, determine the interest expense for 2012.

Note: The company uses a perpetual inventory system.

2011

Mar 19		Purchased $41,250 worth of merchandise from Chipcom, on credit. Terms: 1/10, n/30.
April 29		Replaced the Mar 19 account payable to Chipcom with a 120-day, $35,000 note at 7% annual interest, plus a cash payment of $6,250.
Jun 16		Borrowed $55,000 cash from Sunnyvale Bank. Signed a 90-day, 8% interest-bearing note, with a $55,000 face value.
?		Paid Chipcom the amount due on the note on the date of maturity.
?		Paid Sunnyvale Bank the amount due on the note on the date of maturity.
Oct 30		Borrowed $18,000 cash from UCB Bank. Signed a 90-day, 7% interest-bearing note, with a $18,000 face value.
Dec 31		Recorded an accrued interest adjustment on the UCB Bank note.

2012

?

Paid UCB Bank the amount due on the note on the date of maturity.