Question

Prepare journal entries for the following transactions. Accepted a 60 day, 7% note for $2,000 from Jones Co. on account; received on the due date the amount due from Jones. On October 12th, accepted a 60 day, 5% note for $50,000 from C. Vargas. On December 11th, Vargas dishonored the note (what did you expect from Vargas)? On December 26th Vargas paid the amount due plus interest for 15 days at 10%.

Answer 1

365 days have been taken in a year

	Account titles	Debit	Credit
	Notes Receivable	$             2,000
	Accounts receivable		$               2,000
	(Accepted note on account)
	Cash	$             2,023
	Notes Receivable		$               2,000
	Interest Revenue		$                    23	=2000*7%*60/365
	(Collection of note)
Oct-12	Notes Receivable	$           50,000
	Accounts receivable		$            50,000
	(Accepted note on account)
Dec-11	Accounts Receivable	$           50,411
	Notes Receivable		$            50,000
	Interest Revenue		$                  411	=50000*5%*60/365
	(Dishonor of note)
Dec-26	Cash	$           50,618
	Accounts Receivable		$            50,411
	Interest Revenue		$                  207	=50411*10%*15/365
	(Collection of accounts)