Recording Note Transactions The following information is extracted from TaraCorporation’s accounting records: Required:Prepare journal entries to record the preceding information, assuming that Tarausually does not sell its notes. (Assume a 360-day year for the purposes of computinginterest and round all calculations to the nearest penny.) May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer.6 Received a $9,000, 10%, 120-day note from C. Gable, a customer.11Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from thebank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability forLeigh and Gable is $84 and $110, respectively.The July bank statement indicated that the Leigh note had been paid.July 31Aug. 10 Repaid the $10,000 borrowed on May 11.Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid theamount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11%interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity dateuntil Gable remits the amount owed.Received the amount due from Gable.23

A note is a type of debt instrument that is generally used by companies in exchange for cash. Notes…

Answered: May 1 Received a $6,000, 12%, 90day…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Recording Note Transactions The following information is extracted from Tara
Corporation’s accounting records:

Required:
Prepare journal entries to record the preceding information, assuming that Tara
usually does not sell its notes. (Assume a 360-day year for the purposes of computing
interest and round all calculations to the nearest penny.)

May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer.
6 Received a $9,000, 10%, 120-day note from C. Gable, a customer.
11
Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from the
bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for
Leigh and Gable is $84 and $110, respectively.
The July bank statement indicated that the Leigh note had been paid.
July 31
Aug. 10 Repaid the $10,000 borrowed on May 11.
Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the
amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11%
interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date
until Gable remits the amount owed.
Received the amount due from Gable.
23

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