Question

ABC Corporation had the following transactions:

2020 01-Feb ABC loaned $20,000 To XYZ Corporation in exchange for a 6% 3 month note

28-Feb Made an adjusting entry to accrue interest on XYZ note.

01-May Collected the XYZ note. 01-Jun Received a 3 month 5% , $250,000 note from KLM Incorporated as settlement for their account.

31-Aug Collected the KLM Incorporated note. 01-Sep Sold goods to 123 Limited , receiving a $20,000 six month 5% note

01-Sep Sold the 123 Limited note to DMK Financing receiving $18,800 cash

Required: Prepare the journal entries to record the above transactions

Answer 1

Journal emtries are as follows:

Date	Account and Explanation	Debit($)	Credit($)
2020	Note Receivable	20,000
01 - Feb	Cash		20,000
	(Recorded the notes receivable)
28 - Feb	Interest Receivable ($20,000 *6% *1/12)	100
	Interest Income		100
	(Recorded the interest income for a month)
1 May	Cash	20,300
	Interest Receivable (20,000 *6% *1/12)		100
	Interest Income (20,000 *6% *2/12)		200
	Note Receivable		20,000
	(Recorded the interest and note)
01- June	Note Receivable	250,000
	Cash		250,000
	(Recorded the notes receivable)
31 Aug	Cash	253,125
	Interest Income ($250,000 * 5% *3/12)		3,125
	Note Receivable		250,000
	(Recorded the notes collected)
1 Sept	Notes Receivable	20,000
	Sale		20,000
	(Recorded the Notes Receivable)
1 Sept	Cash	18,800
	Discount	1,200
	Notes Receivable		20,000
	(Recorded the payment of the notes)