Question

Following are transactions of Danica Company. Dec. 13 Accepted a $28,000, 45-day, 8% note in granting Miranda Lee a time extension on her past-due account receivable. 31 Prepared an adjusting entry to record the accrued interest on the Lee note. Exercise 7-13 Notes receivable transactions LO P4 Jan. 27 Received Lee's payment for principal and interest on the note dated December 13. Mar. 3 Accepted a $22,000, 8%, 90-day note in granting a time extension on the past-due account receivable of Tomas Company. 17 Accepted a $20,000, 30-day, 10% note in granting H. Cheng a time extension on his past-due account receivable. Apr. 16 H. Cheng dishonored his note. May 1 Wrote off the H. Cheng account against the Allowance for Doubtful Accounts. June 1 Received the Tomas payment for principal and interest on the note dated March 3.

Complete the table to calculate the interest amounts.

First, complete the table below to calculate the interest amounts.

Tomas Co Note

	Total Through Maturity Principal Rate (%) Time Total interest

M Lee Note

	Total Through Maturity Amount Accrued at December 31 Interest Recognized January 27 Principal Rate (%) Time Total interest

plete the table below to calculate the interest amounts.

H Cheng Note

	Total Through Maturity Principal Rate (%) Time Total interest

General Ledger

• 1 Received Lee’s payment for principal and interest on the note dated December 13. Assume no reversing entries were prepared.

• 2 Accepted a $22,000, 8%, 90-day note in granting a time extension on the past-due account receivable of Tomas Company.

• 3 Accepted a $20,000, 30-day, 10% note in granting H. Cheng a time extension on his past-due account receivable.

• 4 H. Cheng dishonored his note.

• 5 Wrote off the H. Cheng account against the Allowance for Doubtful Accounts.

Answer 1

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M Lee Note
	Total Through Maturity	Amount accrued	Interest Recognized
		at Dec 31	January 27
Principal	$                                                                       28,000	$                    28,000	$                                   28,000
Rate %	8%	8%	8%
Time	45	18	27
Total Interest	$                                                                             280	$                          112	$                                         168
Tomas Co Note		H Cheng Note
	Total Through Maturity		Total Through Maturity
Principal	$                                                                       22,000	Principal	$                                   20,000
Rate %	8%	Rate %	10%
Time	90	Time	30
Total Interest	$                                                                             440	Total Interest	$                                         167
General Journal:
Date	Account	Debit	Credit
Dec 13	Note Receivable-M Lee	$                    28,000
	Accounts Receivable-M Lee		$                                   28,000
	(To record note receivable)
Dec 31	Interest Receivable	$                          112
	Interest Revenue		$                                         112
	(To record interest accrued)
Jan 27	Cash	$                    28,280
	Note Receivable		$                                   28,000
	Interest Receivable		$                                         112
	Interest Revenue		$                                         168
	(To record receipt of Note and Interest)
Mar 3	Note Receivable-Tomas Co	$                    22,000
	Accounts Receivable-Tomas Co		$                                   22,000
	(To record note receivable)
Mar 17	Note Receivable-H Cheng	$                    20,000
	Accounts Receivable-H Cheng		$                                   20,000
	(To record note receivable)
Apr 16	Accounts Receivable-H Cheng	$                    20,167
	Interest Revenue		$                                         167
	Note Receivable-H Cheng		$                                   20,000
	(To record note dishonoured)
May 1	Allowance for Doubtful accounts	$                    20,167
	Accounts Receivable-H Cheng		$                                   20,167
	(To record account written off)
Jun 1	Cash	$                    22,440
	Note Receivable		$                                   22,000
	Interest Revenue		$                                         440
	(To record receipt of Note and Interest)