Question

In an effort to raise some cash for operating activities, Blue Spruce Corporation approached Swifty Ltd. and asked to borrow $140,000 (the Presidents of Blue Spruce and Swifty were cousins). Swifty agreed to loan $140,000 to Blue Spruce for three months at 6% interest. On August 1, Blue Spruce signed a promissory note for the amount, promising to repay the funds plus interest on November 1.

Prepare all the journal entries on the books of Swifty to record the note receivable, assuming that Swifty’s fiscal year-end is September 30 and repayment of the note receivable plus interest occurs on November 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Answer 1

• All working forms part of the answer

Date	Accounts title	Debit	Credit
01-Aug	Notes receivables	$         140,000.00
	Cash		$        140,000.00
	(notes receivables issued)
30-Sep	Interest receivables [140000 x 6% x 2/12]	$             1,400.00
	Interest Revenue		$            1,400.00
	(2 months interest revenue accrued til year end)
01-Nov	Cash	$         142,100.00
	Notes receivables		$        140,000.00
	Interest Receivables [140000 x 6% x 2/12]		$            1,400.00
	Interest Revenue [140000 x 6% x 1/12]		$                700.00
	(Cash received at maturity)