Question

Instructions

(a)   Journalize the transactions.

(b)   Indicate the statement presentation of interest revenue and service charges.

Exercise 3

Para Float Company often requires customers to sign promissory notes for major credit purchases. Journalize the following transactions for Para Float Company.

Feb. 12    Accepted a $30,000, 4%, 60-day note from Yancy Blair for a 24-foot motorboat built to his specifications.

April 14    Received notification from Yancy Blair that he was unable to honor his promissory note but that he expects to pay the amount owed in May.

May 26    Received a check from Yancy Blair for the total amount owed.

June 10    Received notification by the bank that Yancy Blair check was being returned "NSF" and that Mr. Blair had declared personal bankruptcy.

Answer 1

Required 1 :
Date	General Journal	Debit	Credit
Feb-12	Notes receivable	$ 30,000
	Sales revenue		$ 30,000
	(To record Accepted Note from Yancy Blair )
Apr-14	Accounts receivable -Yancy Blair (30,000+200)	$ 30,200
	Notes Receivable		$ 30,000
	Interest revenue ($30,000*4%*60/360)		$ 200
	(To record unable to Honor his Promissory Note on April 14 )
May-26	Cash	$ 30,200
	Accounts receivable -Yancy Blair		$ 30,200
	(To record received a check from Yancy Blair for Amount owned )
Jun-10	Accounts receivable -Yancy Blair	$ 30,200
	Cash		$ 30,200
	(To record Check was returned )
Jun-10	Allowance for Doubtful Accounts	$ 30,200
	Accounts receivable -Yancy Blair		$ 30,200
	(To record Declared Personal Bankruptcy )

Required 2 :

Here, Interest Revenue is to be Classified under Other Income and Expense

Service Charges is to be classified under selling Expenses