Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card
Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card
18th Edition
ISBN: 9781260149197
Author: williams
Publisher: MCG
bartleby

Videos

Question
Book Icon
Chapter 7, Problem 14E

a-1.

To determine

Journalize the receipt of note on August 1, Year 1.

a-1.

Expert Solution
Check Mark

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the receipt of note on August 1, Year 1.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
Year 1
September1Notes Receivable43,200
Accounts Receivable43,200
(Record note receivable received in settlement of account receivable)

Table (1)

Description:

  • Notes Receivable is an asset account. The amount to be received increased, and an increase in asset is debited.
  • Accounts Receivable is an asset account. Since accounts receivable is settled by receipt of note, amount to be received decreased, and a decrease in asset is credited.

2.

To determine

Journalize the adjustment entry of accrued interest revenue on December 31, Year 1.

2.

Expert Solution
Check Mark

Explanation of Solution

Journalize the adjustment entry of accrued interest revenue on December 31, Year 1.

DateAccounts and ExplanationPost Ref.Debit ($)Credit ($)
Year 1
December31Interest Receivable1,620
Interest Revenue1,620
(Record accrued interest on note)

Table (2)

Description:

  • Interest Receivable is an asset account. Since interest to be received has increased, asset value increased, and an increase in asset is debited.
  • Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.

Working Notes:

Compute amount of interest accrued on December 31, Year 1.

Interest accrued = {Principal amount of note × Rate of interest×Time period(From August 1 to December 31)}= $43,200×9%×512= $1,620

3.

To determine

Journalize the collection of principal and interest on the note on January 31, Year 2.

3.

Expert Solution
Check Mark

Explanation of Solution

Journalize the collection of principal and interest on the note on January 31, Year 2.

DateAccounts and ExplanationPost Ref.Debit ($)Credit ($)
Year 2
January31Cash45,144
Notes Receivable43,200
Interest Receivable1,620
Interest Revenue324
(Record principal and interest collected on note)

Table (3)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Notes Receivable is an asset account. Since the note receivable is received, asset account decreased, and a decrease in asset is credited.
  • Interest Receivable is an asset account. Since interest to be received is received, asset value decreased, and a decrease in asset is credited.
  • Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.

Working Notes:

Compute amount of interest revenue on January 31, Year 2.

Interest revenue = {Principal amount of note × Rate of interest×Time period(From December 31, Year 1 to January 31, Year 2)}= $43,200×9%×112= $324

b.

To determine

Journalize the transaction of the note being defaulted on January 31, Year 2.

b.

Expert Solution
Check Mark

Explanation of Solution

Journalize the transaction of the note being defaulted on January 31, Year 2.

DateAccounts and ExplanationPost Ref.Debit ($)Credit ($)
Year 2
January31Accounts Receivable45,144
Notes Receivable43,200
Interest Receivable1,620
Interest Revenue324
(Record the note being defaulted)

Table (4)

Description:

  • Accounts Receivable is an asset account. Since amount to be received has increased, asset account increased, and an increase in asset is debited.
  • Notes Receivable is an asset account. Since the note receivable is received, asset account decreased, and a decrease in asset is credited.
  • Interest Receivable is an asset account. Since interest to be received is received, asset value decreased, and a decrease in asset is credited.
  • Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.

b.

To determine

Indicate the effects of the transactions (1) to (4) in Part (a) on the given financial statement elements, as I (increase), or D (decrease), or NE (no effect).

b.

Expert Solution
Check Mark

Explanation of Solution

Indicate the effects of the transactions (1) to (4) in Part (a) on the given financial statement elements, as I (increase), or D (decrease), or NE (no effect).

Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card, Chapter 7, Problem 14E

Table (5)

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 7 Solutions

Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card

Ch. 7 - Puget Sound Co. sold marketable securities costing...Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - 4. What are lines of credit? From the viewpoint of...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - 8. Explain the fair value adjustment procedure for...Ch. 7 - Prob. 9DQCh. 7 - 10. Explain the relationship between the matching...Ch. 7 - 11. In making the annual adjusting entry for...Ch. 7 - 12. Must companies use the same method of...Ch. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - 15. What is the formula for computing interest on...Ch. 7 - BRIEF EXERCISE 7.1 Cash and Cash Equivalents The...Ch. 7 - Prob. 2BECh. 7 - Prob. 3BECh. 7 - BRIEF EXERCISE 7.4 Accounting for Marketable...Ch. 7 - Prob. 5BECh. 7 - BRIEF EXERCISE 7.6 Accounting for Uncollectible...Ch. 7 - BRIEF EXERCISE 7.7 Accounting for Uncollectible...Ch. 7 - BRIEF EXERCISE 7.8 Analyzing Accounts...Ch. 7 - BRIEF EXERCISE 7.9 Notes Receivable and...Ch. 7 - BRIEF EXERCISE 7.10 Industry Characteristics and...Ch. 7 - BRIEF EXERCISE 7.11 Analyzing Accounts...Ch. 7 - Prob. 1ECh. 7 - EXERCISE 7.2 Financial Assets The following...Ch. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - EXERCISE 7.7 The Nature of Marketable...Ch. 7 - EXERCISE 7.8 Reporting Uncollectible Accounts The...Ch. 7 - EXERCISE 7.9 Industry Characteristics and...Ch. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - EXERCISE 7.12 Effects of Accounting...Ch. 7 - EXERCISE 7.13 Accounting for Marketable...Ch. 7 - Prob. 14ECh. 7 - EXERCISE 7.15 Using the Financial Statements of...Ch. 7 - Prob. 1APCh. 7 - Prob. 2APCh. 7 - PROBLEM 7.3A Aging Accounts Receivable;...Ch. 7 - PROBLEM 7.4A Accounting for Uncollectible...Ch. 7 - Prob. 5APCh. 7 - PROBLEM 7.6A Notes Receivable Eastern Supply sells...Ch. 7 - Prob. 7APCh. 7 - Prob. 8APCh. 7 - Prob. 1BPCh. 7 - Prob. 2BPCh. 7 - PROBLEM 7.3B Aging Accounts Receivable;...Ch. 7 - PROBLEM 7.4B Accounting for Uncollectible...Ch. 7 - Prob. 5BPCh. 7 - PROBLEM 7.6B Notes Receivable Midtown Distribution...Ch. 7 - Prob. 7BPCh. 7 - Prob. 8BPCh. 7 - CASE 7.1 Accounting Principles In each of the...Ch. 7 - CASE 7.2 If Things Get Any Better, We’ll Be...Ch. 7 - CASE 7.3 “Improving” the Balance Sheet Affections...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY