Question

Following are selected transactions of Danica Company for 2016 and 2017.

2016

Dec.		13		Accepted a $14,000, 45-day, 10% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable.
		31		Prepared an adjusting entry to record the accrued interest on the Lee note.

2017

Jan.		27		Received Lee's payment for principal and interest on the note dated December 13.
Mar.		3		Accepted a $8,000, 8%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.
		17		Accepted a $6,000, 30-day, 8% note dated March 17 in granting H. Cheng a time extension on his past-due account receivable.
Apr.		16		H. Cheng dishonored his note when presented for payment.
May		1		Wrote off the H. Cheng account against the Allowance for Doubtful Accounts.
June		1		Received the Tomas payment for principal and interest on the note dated March 3.

Complete the table to calculate the interest amounts and use those calculated values to prepare your journal entries

• M Lee Note

Complete the table to calculate the interest amounts.

	Total Through Maturity Amount Accrued at December 31 Interest Recognized January 27 Principal Rate (%) Time Total interest

• Tomas Co Note

First, complete the table below to calculate the interest amounts.

	Total Through Maturity Principal Rate (%) Time Total interest

• H Cheng Note

First, complete the table below to calculate the interest amounts.

	Total Through Maturity Principal Rate (%) Time Total interest

• General Journal

Use those calculated values to prepare your journal entries.

Journal entry worksheet

• Received Lee’s payment for principal and interest on the note dated December 13. Assume no reversing entries were prepared.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jan 27, 2017

• Accepted a $8,000, 8%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.

Note: Enter debits before credits.

	Date General Journal Debit Credit Mar 03, 2017

• Accepted a $6,000, 30-day, 8% note dated March 17 in granting H. Cheng a time extension on his past-due account receivable.

Note: Enter debits before credits.

	Date General Journal Debit Credit Mar 17, 2017

• H. Cheng dishonored his note when presented for payment.

Note: Enter debits before credits.

	Date General Journal Debit Credit Apr 16, 2017

• Wrote off the H. Cheng account against the Allowance for Doubtful Accounts.

Note: Enter debits before credits.

	Date General Journal Debit Credit May 01, 2017

• Received the Tomas payment for principal and interest on the note dated March 3.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jun 01, 2017

Answer 1

Miranda Lee
	Total Through maturity	Amount accrued at December 31	Interest recognized January 27
Principal	14000	14000	14000
Rate	10%	10%	10%
Time	45/360	18/360	27/360
Total interest	175	70	105

Tomas Company Note
	Total Through maturity
Principal	8000
Rate	8%
Time	90/360
Total interest	160

H. Cheng
	Total Through maturity
Principal	6000
Rate	8%
Time	30/360
Total interest	40

Date	General Journal	Debit	Credit
12/27/2017	Cash	14175
	Interest revenue		105
	Interest receivable		70
	Notes receivable - M.Lee		14000
3/3/2017	Notes receivable - Thomas co.	8000
	Accounts receivable- Thomas co.		8000
3/17/2017	Notes receivable - H.Cheng co	6000
	Accounts receivable- H.Cheng co.		6000
4/16/2017	Accounts receivable- H.Cheng co.	6040
	Interest revenue		40
	Notes receivable - H.Cheng co		6000
5/1/2017	Allowance for doubtful accounts	6040
	Accounts receivable- H.Cheng co.		6040
6/1/2017	Cash	8160
	Interest revenue		160
	Notes recceivable - tomas company		8000