Question

Water Closet Co. wholesales bathroom fixtures. During the current year ending December 31, Water Closet received the following notes:

	Date	Face Amount	Term	Interest Rate
1.	Mar. 6	$75,000	60 days	4%
2.	Apr. 7	40,000	45 days	6%
3.	Aug. 12	36,000	120 days	5%
4.	Oct. 22	27,000	30 days	8%
5.	Nov. 19	48,000	90 days	3%
6.	Dec. 15	72,000	45 days	5%

JOURNAL

ACCOUNTING EQUATION

Score: 91/99

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	Jan. 29 ✔	Cash ✔		72,450 ✔
2		Notes Receivable ✔			72,000✔
3		Interest Receivable ✔			__________
4		Interest Revenue ✔			__________
5	Feb. 17 ✔	Cash ✔		48,360 ✔
6		Notes Receivable ✔			48,000✔
7		Interest Receivable ✔			__________
8		Interest Revenue ✔			__________

Answer 1

For note receivable issued on Dec 15

Amount = $72000

Total days = 45 days

Total interest = 5% of $72000 * 45 days / 360 days = $450

Number of days upto Dec 31 = 16 days

Interest income already recorded = 450/45*16 = $160

Interest income to be recorded = 450/45*29 = $290

1	Jan. 29	Cash	$     72,450
2		Notes Receivable		$     72,000
3		Interest Receivable		$           160
4		Interest Revenue		$           290

For note receivable issued on Nov 19

Amount = $48000

Total days = 90 days

Total interest = 3% of $48000 * 90 days / 360 days = $360

Number of days upto Dec 31 = 42 days

Interest income already recorded = 360/90*42 = $168

Interest income to be recorded = 360/90*48 = $192

1	Jan. 29	Cash	$     48,360
2		Notes Receivable		$     48,000
3		Interest Receivable		$           168
4		Interest Revenue		$           192

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