Question

Details of Notes Receivable and Related Entries

Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes:

	Date	Face Amount		Interest Rate		Term
1.	Apr. 10	$66,000		4%		60	days
2.	June 24	18,000		6		30	days
3.	July 1	27,000		6		120	days
4.	Oct. 31	27,000		5		60	days
5.	Nov. 15	72,000		6		60	days
6.	Dec. 27	180,000		4		30	days

Required:

Assume 360 days in a year.

1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.

Note	(a) Due Date	(b) Interest Due at Maturity
(1)		$
(2)
(3)
(4)
(5)
(6)

2. Journalize the entry to record the dishonor of Note (3) on its due date. If an amount box does not require an entry, leave it blank or enter "0".

3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.

Dec. 31

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. If an amount box does not require an entry, leave it blank or enter "0".

Jan. 14
Jan. 26

Answer 1

1)
	Due		interest due at maturity
	date
1	9-Jun		500
2	24-Jul		84
3	29-Oct		1440
4	30-Dec		1080
5	14-Jan		540
6	26-Jan		600
2)	Date	Account titles & explanations				Debit	Credit
	29-Oct	account receivable				27,540
		interest income					540
		note receivable					27,000
3)	31-Dec	interest receivable				632
		interes income					632
		(note 5    = 72,000*6%*46/360)
		note 6     = 180,000*4%*4/360)
4)	14-Jan	cash				72,720
		note receivable					72,000
		interest receivable					552
		interest income					168
	26-Jan	cash				180,600
		note receivable					180,000
		interest receivable					80
		interest income					520