On October 1, 2019, Island Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement...

On October 1, 2019, Island Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued through December 31, 2019. Island receives the maturity value of the note at maturity. Prepare the journal entry to record the collection.

Expert Solution

The journal entry recorded by Island Jewely Company to record the above transaction is as follows:-

Particulars	Amount	Amount

Cash A/c Dr.	2,480
To Notes Receivable A/c		2,400
To Interest Receivable A/c		60
To Interest Revenue A/c		20
(To record the receipt of notes receivable along with interest)

The Interest receivable that would have been recorded to accrue interest receivable on December 31,2019 is calculated as follows:- $2,400 * 10% * 3/12 = $60(October 2019 - December 2019). This interest receivable is appropriately credited on the receipt of the the proceeds of the note.

The Interest revenue recorded when the note is collected in 2020 is as follows :- $2,400 * 10% * 1/12 = $20(January 2020)

ekkarill92 answered 1 year ago

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