Question

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.

Answer 1

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)