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In: Accounting

Kingbird, Inc. has the following transactions related to notes receivable during the last 2 months of...

Kingbird, Inc. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. (Omit cost of goods sold entries.)

Nov. 1 Loaned $64,800 cash to C. Bohr on a 12-month, 7% note.

Dec. 11 Sold goods to K. R. Pine, Inc., receiving a $1,800, 90-day, 8% note.

Dec. 16 Received a $19,200, 180-day, 12% note to settle an open account from A. Murdock.

Dec. 31 Accrued interest revenue on all notes receivable.

Journalize the transactions for Kingbird, Inc.

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Expert Solution

Solution:

It is assumed that there are 360 days in a year

Total accured interest revenue on 31st December:

Note from C. Bohr = $64,800 * 7% * 2/12 = $756

Note from K. R. Pine Inc. = $1,800 * 8%*20/360 = $8

Note from A. Murdock = $19,200 * 12% * 15/360 = $96

Total accured interest = $756 + $8 + $96 = $860

Journal Entries - Kingbird Inc.
Date Particulars Debit Credit
1-Nov Note receivables/C. Bohr Dr $64,800.00
       To Cash $64,800.00
(To record loan given on receipt of note)
11-Dec Note receivables Dr / K.R. Pine Inc. $1,800.00
       To Sales revenue $1,800.00
(being goods sold on receipt of note)
16-Dec Note receivables Dr / A. Murdock $19,200.00
       To Accounts receivables $19,200.00
(To record note received from debtor)
31-Dec Interest receivables Dr $860.00
       To Interest revenue $860.00
(To record interest revenue on note)

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