Question

Notes Receivable Discounting

Marienau Suppliers had the following transactions:

Mar. 1	Sold merchandise on account to G. Perez, $5,200.
20	G. Perez gave a $5,200, 90-day, 6% note to extend time for payment.
30	G. Perez's note is discounted at Commerce Bank at a discount rate of 8%.
Apr. 20	Received a $2,900, 60-day, 6% note from D. Larson in payment for sale of merchandise.
May 5	D. Larson's note is discounted at Commerce Bank at a discount rate of 7%.
June 19	D. Larson's note is dishonored. The bank bills Marienau for the maturity value of the note plus a $40 bank fee.
July 31	D. Larson's dishonored note is collected; Larson pays Marienau the maturity value of the note, the $40 bank fee, and interest at 6% on the maturity value plus the bank fee.
Aug. 1	Sold merchandise on account to A. Bauer, $5,900.
12	A. Bauer paid $500 and gave a $5,400, 30-day, 5% note to extend time for payment.
Sept. 11	A. Bauer paid $300, plus interest, and gave a new $5,100, 60-day, 6% note to extend time for payment.
26	A. Bauer's note is discounted at Commerce Bank at a discount rate of 7.5%.
Nov. 10	A. Bauer's note is dishonored. The bank bills Marienau for the maturity value of the note plus a $40 bank fee.
Dec. 15	A. Bauer's dishonored note is collected. Bauer pays Marienau the maturity value of the note, the $40 bank fee, and interest at 6% on the maturity value plus the bank fee.

Required:

Record the transactions in a general journal. Assume 360 days in a year.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Mar. 1	Accounts Receivable/G. Perez			fill in the blank 2	fill in the blank 3	1
2		Sales			fill in the blank 5	fill in the blank 6	2
3							3
4	20	Notes Receivable			fill in the blank 8	fill in the blank 9	4
5		Accounts Receivable/G. Perez			fill in the blank 11	fill in the blank 12	5
6							6
7	30	Cash			fill in the blank 14	fill in the blank 15	7
8		Interest Expense			fill in the blank 17	fill in the blank 18	8
9		Notes Receivable			fill in the blank 20	fill in the blank 21	9
10							10
11	Apr. 20	Notes Receivable			fill in the blank 23	fill in the blank 24	11
12		Sales			fill in the blank 26	fill in the blank 27	12
13							13
14	May 5	Cash			fill in the blank 29	fill in the blank 30	14
15		Notes Receivable			fill in the blank 32	fill in the blank 33	15
16		Interest Revenue			fill in the blank 35	fill in the blank 36	16
17							17
18	June 19				fill in the blank 38	fill in the blank 39	18
19					fill in the blank 41	fill in the blank 42	19
20							20
21	July 31				fill in the blank 44	fill in the blank 45	21
22					fill in the blank 47	fill in the blank 48	22
23					fill in the blank 50	fill in the blank 51	23
24							24
25	Aug. 1				fill in the blank 53	fill in the blank 54	25
26					fill in the blank 56	fill in the blank 57	26
27							27
28	12				fill in the blank 59	fill in the blank 60	28
29					fill in the blank 62	fill in the blank 63	29
30					fill in the blank 65	fill in the blank 66	30
31							31
32	Sept. 11				fill in the blank 68	fill in the blank 69	32
33					fill in the blank 71	fill in the blank 72	33
34					fill in the blank 74	fill in the blank 75	34
35					fill in the blank 77	fill in the blank 78	35
36							36
37	26				fill in the blank 80	fill in the blank 81	37
38					fill in the blank 83	fill in the blank 84	38
39					fill in the blank 86	fill in the blank 87	39
40							40
41	Nov. 10				fill in the blank 89	fill in the blank 90	41
42					fill in the blank 92	fill in the blank 93	42
43							43
44	Dec. 15				fill in the blank 95	fill in the blank 96	44
45					fill in the blank 98	fill in the blank 99	45
46					fill in the blank 101	fill in the blank 102	46
47							47

Answer 1

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Ans :

Date	Account title and Description	Ref.	Debit	Credit
March 1	Accounts Receivable -G. Parez To Sales ( Merchandise sold on account)		$ 5,200	$5,200
March 20	Notes Receivable- G. Parez Accounts Receivable -G. Parez ( Note received from G Parez)		$5,200	$5,200
March 30	cash Interest expense    Notes receivable -G. Parez ( Notes discounted with Bank at discounted rate of 8%. Since note is due after 90 days after March 20, its maturity value worked out to be $ 5278.[5200+(5200*6%*90/360) Discount by bank worked out to be $ 93.83. Interest exp = 5200 – 5184.17 = 15.83 .Remaining amount will be recorded as Interest expense)		$5184.17 $15.83	$5,200
April 20	Note Receivables-D. Larson Sale ( Receipt of 60 days, 6% Note )		$2,900	$2,900
May 5	Cash Interest Revenue    Note Receivable- D. Larson ( Notes discounted with Bank at discounted rate of 7%. Since note is due after 60 days after April 20, its maturity value worked out to be $ 2929. Discount by bank worked out to be $ 25.63. As such Bank will pay $ 2929- $ 256.63= $ 2903.37. Thus amount of $ 3.37 will be recorded as Interest revenue)		$2903.37	$ 3.37 $2,900
June 19	Accounts Receivable- D.Larson    Bank ( Dishonour of Note, Bank charge a fee of $ 40)		$2940	$2,940
July 31	Cash Accounts Receivable- D. Larson Interest revenue ( 2969*6%*12/360) (Note received from D. Larson, for dishonored Note, including fee charged by bank)Interest from june 20 to july 31		$2989.78	$2969 20.78
August 1	Accounts receivable - A. Bauer    Sales ( On account sale to A. Bauer)		$5,900	$5,900
August 12	Cash Note Receivable 1-A. Bauer Accounts Receivable-A. Bauer (Cash and Note received from A. Bauer)		$500 $5,400	$5,900
September 11	Cash ( 300 +22.5) Note Receivable 2-A. Bauer    Note Receivable 1-A. Bauer    Interest revenue (5400*5%*30/360)    ( New Note Received from A. Bauer)		$322.5 $5100	$5,400 22.5
September 26	Cash        Interest Revenue        Note Receivable 2-A. Bauer [(5100+(5100*6%*60/360)]=5151- (5151*7.5%*45/360) = 5102.		5102.71	2.71 5100
November 10	Accounts Receivable-A. Bauer    Bank (5151 + 40)		5191	5191
Dec 15	Cash Accounts Receivable-A. Bauer    Interest revenue ( 5191 *6% * 35/360) . from nov 10 to dec 15		5221.28	5191 30.28