Notes receivable and notes payable a) On December 1, 2018, Hawkins, Inc. loaned money to a...

Notes receivable and notes payable

a) On December 1, 2018, Hawkins, Inc. loaned money to a customer who signed a note having a face value of $16,200. The note is due on May 1, 2019 and does not specific an interest rate. Hawkins credited cash for $15,500 on December 1 as a result of the loan.

Required:

Prepare the entry on the books of Hawkins, Inc. to record the note-related activity on:

December 1, 2018

December 31, 2018

May 1, 2019.

b) On March 15, 2018, Powell Corp. borrowed money by signing a note having a face value of $28,500. The note is due on March 15, 2019 and does not specific an interest rate. Powell debited cash for $26,700 on March 15 as a result of the loan.

Required:

Prepare the entry on the books of Hawkins, Inc. to record the note-related activity on:

March 15, 2018

December 31, 2018

March 15, 2019.

Expert Solution

Part 1
value of notes receivable	16200
Less: value credited to customer	15500
interest expenses for notes receivable	700
number of months for notes (Dec 1, 2018 To May 1, 2019)	5 Months
Interest per month (700/ 5 months)	140

Part 2
Value of notes receivable	28500
Less: cash debited by Powell Corp (it means cash credited by Hawkins Inc. Notes receivable for Hawkins Inc.,)	26700
Discount on notes Receivable	1800
number of months for notes (Mar 15, 2018 To Mar 15, 2019)	12 Months
Interest per month (1800/ 12 months)	150
period in 2018 (Mar 15, 2018 to Dec 31, 2018)	9.5 Months
*Interest revenue for 2018 (1509.5 months)**	1425

Hawkins, Inc.
Journal entries
date	Account title	Debit	Credit
01-Dec-18	Notes receivable	16200
	Discount on notes receivable		700
	Cash		15500
	(To record Hawkins, Inc. loaned money to a customer who signed a note having a face value of $16,200)

31-Dec-18	Discount on notes receivable	140
	interest revenue		140
	(To record interest revenue and discount amortization on notes receivable for the year 2018.)

01-May-19	Discount on notes receivable (140 * 4 months)	560
	Cash	16200
	interest revenue		560
	Notes receivable		16200
	(To record amount due from notes receivable.)

Hawkins, Inc.
Journal entries
date	Account title	Debit	Credit
15-Mar-18	Cash	26700
	Discount on notes payable	1800
	Notes payable		28500
	(To record

December 31, 2018	Discount on notes receivable	1425
	interest revenue		1425
	(To record interest revenue and discount amortization on notes receivable for the year 2018.)

March 15, 2019.	Discount on notes receivable (150 * 2.5months)	375
	Cash	28500
	interest revenue		375
	Notes receivable		28500
	(To record amount due from notes receivable.)

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