Question

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Following are transactions of Danica Company.

Dec.		13		Accepted a $20,000, 45-day, 9% note 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.

Exercise 7-12 Notes receivable transactions LO C2

Complete the table to calculate the interest amounts at December 31^st and use the calculated value to prepare your journal entries. (Do not round your intermediate calculations. Use 360 days a year.)

Answer 1

Working Notes:
	CALCULATION OF TOTAL INTEREST AND INTEREST EXPENSES AS ON DEC 31.
		Interest Expenses As on Dec 31
	Principal value of note	$                   20,000
	Rate %	9%
	Time in Days	18 Days
	Total Interest($ 20,000 X 9% X 18 / 360 Days)	$                           90
Solution:
Journal Entries
Date	ACCT Title and explanation	Debit	Credit
Dec. 31	Interest Exenses	$                           90
	Interest Payable		$                       90
	(To record the interest expenses at year end)