- Rachel was recently hired by Moncton Express Inc (MEI) toassist its payable clerk in bringing the accounts up to date.Rachel was asked to record the following transactions:
August 15: MEI purchased a new inventory monitoring system. MEIissued a $6,000 non-interest bearing note payable, due on October15.
August 18: MEI borrowed $10,000 from the bank in the form of ademand note. MEI authorizes the bank to take the interest paymentsfrom its bank account. Interest is payable on the last day of eachmonth at 4% per annum.
August 21: MEI purchased $8,000 of inventory, plus HST, onaccount. The terms offered are 3/10, net 45.
September 20: MEI purchased a waste management system. MEIissues an $8,000, non-interest bearing note payable due in oneyear.
September 23: MEI purchases $3,000 of inventory, plus HST, onaccount. The terms offered are 3/10, net 45.
September 24: Rachel pays the August 21 and September 23invoices.
September 30: Rachel 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 interim statements arenormally prepared on a monthly basis.
- MEI’s latest interim statements are for the month ended July31. The necessary accruals were made at that time, except that MEIonly records depreciation expense at year-end.
- The market rate of interest for MEI’s short-term borrowings is5%.
Required:
Prepare journal entries to record thedocumented events and the necessary accruals for the months ofAugust and September. Â Â Calculate interest accruals basedon the number of days, rather than months. Round your answers tothe nearest dollar.
