Question

C&S Marketing (CSM) recently hired a new marketing director, Jeff Otos, for its downtown Minneapolis office. As part of the arrangement, CSM agreed on February 28, 2018, to advance Jeff $50,000 on a one-year, 8 percent note, with interest to be paid at maturity on February 28, 2019. CSM prepares financial statements on June 30 and December 31.

Prepare the journal entry CSM will make when the note is established, accrue interest on June 30 and December 31, and the interest and principal payments on February 28, 2019. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to whole dollar amount.)

Answer 1

Solution:

CSM
Journal Entries
Date	Particulars	Debit	Credit
28-Feb	Note receivables Dr	$50,000.00
	To Cash		$50,000.00
	(to record receipt of note)
30-Jun-18	Interest receivables Dr ($50,000*8%*4/12)	$1,333.00
	To Interest revenue		$1,333.00
	(To record interest revenue)
31-Dec-18	Interest receivables Dr ($50,000*8%*6/12)	$2,000.00
	To Interest revenue		$2,000.00
	(To record interest revenue)
28-Feb-19	Cash Dr	$54,000.00
	To Note receivables		$50,000.00
	To Interest receivables		$3,333.00
	To Interest revenue		$667.00
	(To record collection at maturity)