(1)
Note receivable:
Note receivable refers to a written promise received by the creditor from the debtor in formal, for the amounts to be settled within a stipulated period of time. This written promise is issued by a debtor or borrower to the lender or creditor. Notes receivable is an asset of a business. Notes receivable often used for the credit periods of more than 60 days.
Due date:
Due date is the maturity date on note, on due date the borrower is supposed to repay the face value of the note along with interest.
Interest on note:
Interest on note is the amount charged on the principal value of note for the privilege of borrowing money. Interest is to be paid by the borrower and to be received by the lender.
Dishonored note:
Note receivable refers to a written promise by the debtor for the amounts to be received within a stipulated period of time. Note is otherwise known as promissory note. If this promissory note is not settled by the debtor at its maturity date, then it became is known as dishonored note.
(a) the due date and (b) the amount of interest due at maturity.
(1)
Explanation of Solution
Determine (a) the due date and (b) the amount of interest due at maturity.
Due date | Amount of interest due at maturity | |
1. | February 13 | $110 (1) |
2. | April 23 | $525 (2) |
3. | October 10 | $600 (3) |
4. | November 6 | $200 (4) |
5. | January 14 | $480 (5) |
6. | February 8 | $240 (6) |
Table (1)
Working note:
For note 1:
Calculate the amount of interest due at maturity.
For note 2:
Calculate the amount of interest due at maturity.
For note 3:
Calculate the amount of interest due at maturity.
For note 4:
Calculate the amount of interest due at maturity.
For note 5:
Calculate the amount of interest due at maturity.
For note 6:
Calculate the amount of interest due at maturity.
Note:
Due date has been identified by omitting the date of note received but including the due date.
(2)
To journalize: The dishonor of Note (3) on its due date.
(2)
Answer to Problem 8.4BPR
Journalize the dishonor of Note (3) on its due date.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 10 | 48,600 | ||
Notes receivable | 48,000 | ||
Interest revenue (3) | 600 | ||
(To record dishonor of Note 3) |
Table (1)
Explanation of Solution
Note 3 has been dishonored on its due date. To record the dishonor on note, full value of note and accrued interest on note must be recorded as accounts receivable at the date of maturity. To record the defaulted note, accounts receivable and interest revenue should be increased and notes receivable should be eliminated. Hence,
- An increase in accounts receivable (asset account) is debited with $48,600,
- A decrease in notes receivable (asset account) is credited with $48,000, and
- An increase in interest revenue (
stockholders’ equity account) is credited with $600.
(3)
To journalize: The
(3)
Answer to Problem 8.4BPR
Journalize adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
December 31 | Interest receivable | 452 | |
Interest revenue (9) | 452 | ||
(To record the interest revenue accrued on the Note 5and Note 6 ) |
Calculate the amount of interest revenue accrued on Note 5 as on December 31.
Calculate the amount of interest revenue accrued on Note 6 as on December 31.
Calculate the total amount of interest revenue accrued on Note 5 and Note 6.
Explanation of Solution
On December 31, company has to record its accrued interest revenue on its note receivable, as December 31 is the accounting year end date of the company. This accrued interest revenue has to be recognized by increasing interest receivable and by increasing interest revenue of $452. Hence,
- An increase in interest receivable (asset account) is debited with $452 (9), and
- An increase in interest revenue (stockholders’ equity account) is credited with $452 (9).
(4)
To journalize: The entries to record the receipt of the amounts due on Notes (5) and (6) in January.
(4)
Answer to Problem 8.4BPR
Date | Account Title and Explanation | Debit ($) | Credit ($) |
January 14 | Cash | 36,480 | |
Notes receivable | 36,000 | ||
Interest receivable (7) | 368 | ||
Interest revenue (10) | 112 | ||
(To record the collection of cash on note 5 in full) |
Date | Account Title and Explanation | Debit ($) | Credit ($) |
January 29 | Cash | 24,240 | |
Notes receivable | 24,000 | ||
Interest receivable (8) | 84 | ||
Interest revenue (11) | 156 | ||
(To record the collection of cash on note 6 in full) |
Calculate the amount of interest revenue earned on Note 5 from January 1 to January 14.
Calculate the amount of interest revenue earned on Note 6 from January 1 to February 8.
Explanation of Solution
On January 14, company has collected cash on note along with interest on its note receivable on Note 5. When a notes receivable is matured, it has to be cancelled by decreasing the note receivable account.
- To decrease the (asset account) note receivable, credit the note receivable account with $36,000.
- Interest receivable has been collected at maturity. Hence, it has to be cancelled by decreasing the interest receivable account. To decrease the (asset account) interest receivable, credit the interest receivable account with $368 (7).
- Interest revenue earned for last 28 days has to be recognized at maturity date. Hence, to increase the interest revenue balance, credit the interest revenue account with $112 (10).
- Collection of cash on note increases cash. Hence, to increase the cash account balance, debit the cash account with $36,480.
On February 8, company has collected cash on note along with interest on its note receivable on Note 6. When a notes receivable is matured, it has to be cancelled by decreasing the note receivable account.
- To decrease the (asset account) note receivable, credit the note receivable account with $24,000.
- Interest receivable has been collected at maturity. Hence, it has to be cancelled by decreasing the interest receivable account. To decrease the (asset account) interest receivable, credit the interest receivable account with $84 (8).
- Interest revenue earned for last 28 days has to be recognized at maturity date. Hence, to increase the interest revenue balance, credit the interest revenue account with $156 (11).
- Collection of cash on note increases cash. Hence, to increase the cash account balance, debit the cash account with $24,240.
Want to see more full solutions like this?
Chapter 8 Solutions
CengageNOWv2, 2 terms Printed Access Card for Warren?s Financial & Managerial Accounting, 13th, 13th Edition
- A company collects an honored note with a maturity date of 24 months from establishment, a 10% interest rate, and an initial loan amount of $30,000. Which accounts are used to record collection of the honored note at maturity date? A. Interest Revenue, Interest Expense, Cash B. Interest Receivable, Cash, Notes Receivable C. Interest Revenue, Interest Receivable, Cash, Notes Receivable D. Notes Receivable, Interest Revenue, Cash, Interest Expensearrow_forwardComputing Accrued Interest Compute the interest accrued on each of the following notes receivable held by Northland, Inc., on December 31: (Use 360 days for interes nearest dollar.) Date of Maker Note Maple November 21 Wyman December 13 Nahn December 19 Maple: $ Wyman: Nahn: 0 0 0 Principal $20,000 16,000 23,000 Interest Rate Term 10% 120 days 996 90 days 896 60 daysarrow_forwardDetails of Notes Receivable and Related Entries Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes: Date Face Amount Interest Rate Term 1. Apr. 10 $90,000 4% 60 days 2. June 24 15,600 6 30 days 3. July 1 27,000 6 120 days 4. Oct. 31 27,000 9 60 days 5. Nov. 15 54,000 6 60 days 6. Dec. 27 108,000 4 30 days Required: Assume 360 days in a year. 1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. Note (a)Due Date (b)Interest Due at Maturity (1) June 9 $ (2) July 24 (3) Oct. 29 (4) Dec. 30 (5) Jan. 14 (6) Jan. 26 2. Journalize the entry to record the dishonor of Note (3) on its due date. If an amount box does not require an entry, leave it blank or enter "0". Oct. 29 Accounts Receivable Notes Receivable Interest Revenue…arrow_forward
- Entries for Notes Receivable Autumn Designs & Decorators issued a 120-day, 5% note for $93,000, dated April 13 to Zebra Furniture Company on account. Assume a 360-day year when calculating interest. a. Determine the due date of the note. b. Determine the maturity value of the note.$fill in the blank 28a784fcdfa8f9b_2 c1. Journalize the entry to record the receipt of the note by Zebra Furniture. If an amount box does not require an entry, leave it blank. fill in the blank 6f2377033fbef92_2 fill in the blank 6f2377033fbef92_3 fill in the blank 6f2377033fbef92_5 fill in the blank 6f2377033fbef92_6 c2. Journalize the entry to record the receipt of payment of the note at maturity. If an amount box does not require an entry, leave it blank. fill in the blank c12f99fe5012fd4_2 fill in the blank c12f99fe5012fd4_3 fill in the blank c12f99fe5012fd4_5 fill in the blank c12f99fe5012fd4_6 fill in the blank c12f99fe5012fd4_8…arrow_forwardComputing Accrued Interest Compute the interest accrued on each of the following notes receivable held by Northland, Inc., on December 31: (Use 360 days for interest calculation. Round to the nearest dollar.) Date of Note Maker Maple November 21 Wyman December 13 Nahn December 19 Maple: $ Wyman: Nahn: Principal $25,000 21,000 28,000 Interest Rate 3% 4% 5% Term. 120 days 90 days 60 daysarrow_forwardCalculate interest accrued for the following notes receivable as of December 31st using the following information: Maker Note 1 Note 2 $272.61 $276.40 $700 $791.67 Date of Note 11/15 12/15 Principal $20,000 $10,000 Interest Rate 10% 5% Term 120 days 90 daysarrow_forward
- Entries for Notes Receivable Autumn Designs & Decorators issued a 120-day, 6% note for $30,000, dated April 13 to Zebra Furniture Company on account. Assume a 360-day year when calculating interest. Question Content Area a. Determine the due date of the note. b. Determine the maturity value of the note.$fill in the blank 9a5f4f073f8df8f_2 Question Content Area c1. Journalize the entry to record the receipt of the note by Zebra Furniture. If an amount box does not require an entry, leave it blank. blank Notes Receivable Notes Receivable Accounts Receivable-Autumn Designs Decorators Accounts Receivable-Autumn Designs Decorators Question Content Area c2. Journalize the entry to record the receipt of payment of the note at maturity. If an amount box does not require an entry, leave it blank. blank - Select - - Select - - Select - - Select - - Select - - Select -arrow_forwardEntries for notes receivable Spring designs and decorators issued a 120- day, 8% note for 78,000, dated April 13th to Jaffe furniture company on account. Assume a 360 day year when calculating interest. A. Determine the due date of the note. _______ B. Determine the maturity level of the note. $ _______ C1. Journalizing entry to record the receipt of the note by Jaffe furniture. ____________ ____________ c2.journalize the entry to record the receipt of payment of the note at maturity. If an amount box does not require an entry, leave it blank. __________ __________ __________arrow_forwardDetermine the interest and due dates on notes Cora Company had the following notes this year: Date of Note Face Amount Interest Rate Term of Note Due Date Interest Due a. April 24 $70,000 3% 90 days b. July 13 30,000 4% 60 days c. August 9 40,000 5% 120 days Required Determine the due dates and interest due for each of the notes by completing the schedule above.arrow_forward
- Transactions: Apr. 30 Issued a $198,000, 30-day, 6% note dated April 30 to Misner Co. on account. May 30 Paid Misner Co. the amount owed on the note dated April 30. Required: Journalize the above transaction, assuming a 360-day year is used for interest calculations. Refer to the Chart of Accounts for exact wording of account titles. CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment LIABILITIES 211 Accounts Payable-Batson Company 212 Accounts Payable-Jergens Inc. 213 Accounts Payable-Misner Co. 214 Accounts Payable-Scotland Company 221 Notes Payable-Batson Company 222 Notes Payable-Jergens Inc. 223 Notes Payable-Misner Co. 224 Notes Payable-Scotland…arrow_forwardAccounting for a note receivable On June 6, Lakeland Bank & Trust lent $80,000 to Stephan Stow on a 30-dav, 9% note. Requirements Journalize for Lakeland the lending of the money on June 6. Journalize the collection of the principal and interest at maturity. Specify the date. Round to the nearest dollar.arrow_forwardComputing Accrued Interest Compute the interest accrued on each of the following notes receivable held by Kierland, Inc, on December 31: (Round to the nearest dollar.) Date of Interest Principal RateTerm Maker Abel November 21 $36,000 12% 120 days Baker December 13 32,000 996 90 days! Charlie December 19 42,000 6% 60 days! Note Abel Baker $ Charliearrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,