Question

Miles Company had the following select receivable transactions.

2019

11/1 Loaned $24,000 cash to N. Jones on a 12-month, 8% note.

12/1 Made Miles Company credit card sales totaling $10,500. (There were no balances prior to December 1.)

12/15 Made Visa credit card sales totaling $14,800 (service charge fee 2%).

12/30 Collected $4,400 on Miles Company credit card sales.

12/31 Added finance charges of 1% to Miles Company credit card balance.

12/31 Accrued interest on N. Jones note.

2020

11/1 Received principal plus interest on N. Jones note.

Instructions Prepare journal entries to record the transactions above assuming Miles Company prepares adjusting entries once a year on December 31.

Answer 1

	Journal Entries
Date	Accounts	Debit	Credit
2019
Nov-01	Notes Receivable	24,000
	To Cash		24,000
	( Loaned $24,000 cash to N. Jones on a 12-month, 8% note. )
Dec-01	Accounts Receivable Dr.	10,500
	To Sales Revenue		10,500
	( To Record credit card sales )
Dec-15	Bank A/c Dr.	14,504
	Service Charge Fee Dr. ( 14,800 * 2% )	296
	To Sales Revenue		14,800
	( To Record Visa credit card sales )
Dec-30	Bank A/c Dr.	4,400
	To Account Recievable		4,400
	( To Record collection of credit card sales )
Dec-31	Account Receivables Dr.	61
	To interest Revenue [ ( 10,500 - 4,400 ) * 1% ]		61
	( To record finance charges added on credit card balance )
Dec-31	Interest Receivable Dr. ( 24,000 * 8% * 2/12 )	320
	To Interest Revenue		320
	( To Record Accrued interest on N. Jones note for 2 months. )
2020
Nov-01	Cash A/c Dr	25,920
	To Notes Receivable		24,000
	To Interest Receivable		320
	To Interest Revenue ( 24,000 * 8% * 10 / 12 )		1,600
	( To Record reciept of amount of Note receivable plus interest on maturity date )

Working notes:

Interest Calculation on note recievable
Total Interest on note for 12 months	=24,000*8%	1,920
( from Nov 1 , 2019 to Nov 1 ,2020 )
Interest Till Dec 2019 ( for 2 months )	=24,000*8%*2/12	320
Interest from Jan 2020 Till oct 2020( for 10 months )	=24,000*8%* 10/12	1,600

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