Question

On January 1, 2019 Lindsay Inc. provided consulting services( NOT CASH ) to Hamler Corp. in return for a 2 year, zero interest note. Hamler Corp will pay Lindsay Inc. $20,000 when the note matures on December 31, 2020. The interest rate on similar notes is 6%. Complete the following amortization table related to Lindsay’s Notes Receivable.
	Date	Cash Received	Interest Revenue	Disc/Prem Amortized	Carrying Amount
	1-Jan

Please prepare the necessary journal entries for Lindsay Inc. in 2019 and 2020.

Answer 1

Present Value of $20,000 receivable after two year from 01-01-2019.
=		$20,0000/(1.06)(1.06)
=		$ 17,799.93
Date	Cash Received/ PV of Notes Receivable	Opening Balance	Interest Revenue	Disc/Premium Amortized	Carrying Amount
01-01-2019	17799.93	0.00	0.00	0.00	0.00
31-12-2019	0.00	0.00	1068.00	0.00	18867.93
31-12-2020	0.00	18867.93	1132.07	0.00	20000.00

Journal Entry for the above transaction is as under

	Accounts	Debit ( In TL.000)	Credit ( In TL. )
01-01-2019	Notes Receivable A/C Dr	17,799.93
	Consulting Income		17,799.93
	(Being Income and Notes Receivable recognised)
31-12-2019	Notes Receivable A/C Dr	1068.00
	To Interest Income		1,068
	(Being Interest Income recognised for the year 2019)
31-12-2019	Interest Income A/c Dr	1,068
	To Profit & Loss A/c		1,068
	( Being Interest Income charged in Profit and Loss A/c )
31-12-2020	Notes Receivable A/C Dr	1,132.07
	To Interest Income		1,132.07
	(Being Interest Income recognised for the year 2020)
31-12-2020	Interest Income A/c Dr	1,132.07
	To Profit & Loss A/c		1,132.07
	( Being Interest Income charged in Profit and Loss A/c )
31-12-2020	Cash A/c Dr	20,000
	To Notes Receivable		20,000
	( Being Cash received on Maturity of Notes)