Question

Following are selected transactions of Danica Company for 2016 and 2017. 2016 Dec. 13 Accepted a $18,000, 45-day, 6% 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 $12,000, 6%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company. 17 Accepted a $10,000, 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. (Do not round intermediate calculations. Use 360 days a year.)

Answer 1

	M.Lee Note
		total	Amount	interest
		through	accrued at	Recognized
		Maturity	31-Dec	27-Jan
	Principal	18,000	18,000	18,000
	Rate(%)	6%	6%	6%
	time	45/360	18/360	27/360
	total intt	135	54	81
	Tomas co Note
		total
		through
		Maturity
	Principal	12,000
	Rate(%)	6%
	time	90/360
	total intt	180
	H.Cheng note
		total
		through
		Maturity
	Principal	10,000
	Rate(%)	8%
	time	30/360
	total intt	67
	Journal Entries
	Date	General Journal				Debit	Credit
	2016
	13-Dec	Note receivable				18,000
		Accounts receivable					18,000
	31-Dec	interest receivable				54
		interest income					54
	2017
	27-Jan	Cash				18,135
		interest receivable					54
		interest income					81
		Note receivable -M lee					18,000
	3-Mar	Note receivable				12,000
		Account receivable-Tomas					12,000
	17-Mar	Note receivable				10,000
		Account receivable-H.Cheng					10,000
	16-Apr	Account receivable-H.Cheng				10,067
		interest income					67
		note receivable					10,000
	1-May	Allowance for Doubtful Accounts				10,067
		Accounts receivable-H.Cheng					10,067
	1-Jun	Cash				12,180
		interest income					180
		note receivable-tomas					12,000