Question

oe's Supply Co. has the following transactions related to notes receivable during the last 2 months of 2014. Nov. 1 Loaned $20,000 cash to Sara Rondelli on a 1-year, 12% note. Dec. 11 Sold goods to Phair, Inc., receiving a $11,700, 90-day, 8% note. 16 Received an $12,000, 6-month, 9% note in exchange for Grace Tanner's outstanding accounts receivable. 31 Accrued interest revenue on all notes receivable. Instructions (a) Journalize the transactions for Joe's Supply Co. (b) Record the collection of the Rondelli note at its maturity in 2015.

Answer 1

a) Journal Entries (Amts in $)

Date	Account Titles and Explanation	Debit	Credit
Nov. 1	Notes Receivable	20,000
	Cash		20,000
	(To record the amount loaned to Rondelli)
Dec. 11	Notes Receivable	11,700
	Sales Revenue		11,700
	(To record the sales recenue)
Dec. 16	Notes Receivable	12,000
	Accounts Receivable		12,000
	(To record the receipt of note receivable)
Dec. 31	Interest Receivable	501
	Interest Revenue		501
	(To record interest revenue)

Working Note:-

1) Calculation of Interest receivable on Dec. 31

Interest on 12% note = $20,000*12%*2/12 = $400 (from Nov. 1 to Dec. 31)

Interest on 90 day note = $11,700*8%*21/365 = $54

Interest on 6 month note = $12,000*9%*16/365 = $47

Total Interest Revenue = $400+$54+$47 = $501

b) Journal Entries (Amts in $)

Date	Account Titles and Explanation	Debit	Credit
Oct. 31, 2015	Cash (20,000+2,000+400)	22,400
	Notes Receivable		20,000
	Interest Revenue (20,000*12%*10/12)		2,000
	Interest Receivable		400
	(To record the collection of interest revenue)