Question

Ace Distributors has the following transactions related to notes receivable during the last month of the year.

Dec.	1		Loaned $15,000 cash to K. Hogan on a 1-year, 6% note.
	16		Sold goods to F. Manning, receiving a $4,800, 60-day, 7% note.
	31		Accrued interest revenue on all notes receivable.

Journalize the transactions for Ace Distributors. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 1
Dec. 16
Dec. 31

Answer 1

Answer :-

Journal entries required to record the transactions for Ace Distributors are as follows :-

Date	Account Titles and Explanation	Debit	Credit
Dec. 1	Notes Receivable A/c Dr.	$15,000
	To Cash A/c		$15,000
	(To record Loaned cash to K. Hogan on a 1-year, 6% note)
Dec. 16	Notes Receivable A/c Dr.	$4,800
	To Sales Revenue A/c		$4,800
	(To record sale of goods to F. Manning, receiving a $4,800, 60-day, 7% note)
Dec. 31	Interest Receivable A/c Dr. (Note - 1)	$89
	To Interest Revenue A/c		$89
	(To record accrued interest revenue on all notes receivable)

Note 1 :-

Interest revenue of K. Hogan note = $15,000 × 6% × 1 month / 12 months

As loaned cash to K. Hogan on Dec. 1 then Interest revenue is calculated for 1 month.

Interest revenue of K. Hogan note = $75

Interest revenue of F. Manning = $4,800 × 7% × 15days / 365 days

As Good sale to F. Manning on Dec 16 then interest revenue is calculated for 15 days.

Interest revenue of F. Manning = $14 (approx.)

Total Interest revenue = Interest revenue of K. Hogan + Interest revenue of F. Manning

Total interest revenue = $75 + $14 =$89