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In: Accounting

On 1 September 2019, Mike Co. signed a 12% six-month note receivable in settlement of accounts...

On 1 September 2019, Mike Co. signed a 12% six-month note receivable in settlement of accounts receivable of €320,000. The note and interest are all due at maturity.

  1. Prepare the entry on 1 September 2019 made by Mike Co. to record the receipt of this note receivable. (5 points)
  2. Prepare the 31 December 2018 (fiscal year-end), adjusting entry made by Mike Co. with regard to this note receivable. (5 points)
  3. Prepare the entry made by Mike Co. on 1 March 2020 (maturity date of note), to record collection of note and interest. (5 points)
  4. Assume that on 1 March 2020, the maker of the note defaults and Mike Co. does not collect the note and interest. Explain what Mike Co. would do in accounting records in this situation. (5 points)

General Journal

Date

Account Titles and Explanation

Debit

Credit

(a)

           

(b)

(c)

Solutions

Expert Solution

Journal
SI.No Date Account Titles and Explanation Debit Credit
a 1-Sep-19 12% Note Receivable Dr        320,000
To Accounts Receivable        320,000
b 31-12-19 12% Note Receivable Dr           12,800
To Interest Income           12,800
c 01-03-20 12% Note Receivable Dr             6,400
To Interest Income             6,400
Cash        339,200
To 12% Note Receivable        339,200
If the maker of the note defaults
d 01-03-20 Accounts Receivable        339,200
To 12% Note Receivable        339,200

ekkarill92 answered 1 year ago
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