Question

Year 1

Dec.		16			Accepted a $14,400, 60-day, 8% note in granting Hao Lee a time extension on his past-due account receivable.
		31			Made an adjusting entry to record the accrued interest on the Lee note.

Year 2

Feb.		14			Received Lee’s payment of principal and interest on the note dated December 16.
Mar.		2			Accepted a $9,000, 8%, 90-day note in granting a time extension on the past-due account receivable from Taylor Co.
		17			Accepted a $4,200, 30-day, 10% note in granting Susan Allen a time extension on her past-due account receivable.
Apr.		16			Allen dishonored her note.
May		31			Taylor Co. dishonored its note.
Aug.		7			Accepted a $12,000, 90-day, 12% note in granting a time extension on the past-due account receivable of Carter Co.
Sep.		3			Accepted a $5,400, 60-day, 10% note in granting June Taylor a time extension on his past-due account receivable.
Nov.		2			Received payment of principal plus interest from Taylor for the September 3 note.
Nov.		5			Received payment of principal plus interest from Carter for the August 7 note.
Dec.		1			Wrote off the Allen account against the Allowance for Doubtful Accounts.

General Journal tab - Prepare the Year 2 journal entries related to the notes and accounts receivable of Clark Co.

Calculation of interest tab - Use the interest formula (P x R x T) to verify the amount of interest recorded in your entries.  Verify that total interest revenue agrees with the trial balance.

Answer 1

Date	General Journal	Debit	Credit
Year 1, Dec 16	Note receivable -- hao lee	14,400
	Accounts receivable -- hao lee		14,400
	Note in granting hao lee a time extension on his past-due account receivable.
Dec-31	Interest receivable (14400*8%*15/360)	48
	Interest revenue		48
	To record the accrued interest on the lee note.
Date	General Journal	Debit	Credit
Year 2, Feb 14	Cash	14,592
	Note receivable -- hao lee		14,400
	Interest receivable		48
	Interest revenue (14400*8%*45/360)		144
	Received lee’s payment of principal and interest on the note.
Mar-02	Note receivable -- Taylor Co	9,000
	Accounts receivable -- Taylor Co		9,000
	Granting a time extension on the past-due account receivable from Taylor Co.
Mar-17	Note receivable -- Susan Allen	4,200
	Accounts receivable -- Susan Allen		4,200
	Granting Susan Allen a time extension on her past-due account receivable.
Apr-16	Accounts receivable -- Susan Allen	4,235
	Note receivable -- Susan Allen		4,200
	Interest revenue (4200*10%*30/360)		35
	Allen dishonored her note.
May-31	Accounts receivable -- Taylor Co	9,540
	Note receivable -- Taylor Co		9,000
	Interest revenue (9000*8%*9/12)		540
	Taylor Co. dishonored its note.
Aug-07	Note receivable -- Carter Co.	12,000
	Accounts receivable -- Carter Co.		12,000
	Granting a time extension on the past-due account receivable of Carter Co.
Sep-03	Note receivable -- June Taylor	5,400
	Accounts receivable -- June Taylor		5,400
	Granting June Taylor a time extension on his past-due account receivable.
Nov-02	Cash	5,490
	Note receivable -- June Taylor		5,400
	Interest revenue (5400*10%*60/360)		90
	Received payment of principal plus interest from Taylor
Nov-05	Cash	12,360
	Note receivable-- Carter Co.		12,000
	Interest revenue (12000*12%*90/360)		360
	Received payment of principal plus interest from Carter
Dec-01	Allowance for doubtful accounts	4,235
	Accounts receivable		4,235
	Wrote off the Allen account against the Allowance for Doubtful Accounts.