Question

On December 31, 2017, Bonita Inc. rendered services to Beghun Corporation at an agreed price of $107,016, accepting $41,400 down and agreeing to accept the balance in four equal installments of $20,700 receivable each December 31. An assumed interest rate of 10% is imputed.

Prepare an amortization schedule. Assume that the effective-interest method is used for amortization purposes. (Round answers to 0 decimal places, e.g. 5,275.)

December 31, 2017
Schedule of Note Discount Amortization
Date
Cash
Received
Interest
Revenue
Carrying
Amount of Note
12/31/17 $
$
$
12/31/18
12/31/19
12/31/20
12/31/21

Prepare the entries that would be recorded by Bonita Inc. for the sale on December 31, 2017. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation
Debit
Credit

Prepare the entries that would be recorded by Bonita Inc. for the (a) receipts and (b) interest on December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

Prepare the entries that would be recorded by Bonita Inc. for the (a) receipts and (b) interest on December 31, 2019. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

Prepare the entries that would be recorded by Bonita Inc. for the (a) receipts and (b) interest on December 31, 2020. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

Prepare the entries that would be recorded by Bonita Inc. for the (a) receipts and (b) interest on December 31, 2021. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

Answer 1

Solution:

Schedule of Note Discount Amortization - Bonita Inc.
Date	Cash Received	Interest Revenue	Carrying amount of note
31-Dec-17			$65,616
31-Dec-18	$20,700	$6,562	$51,478
31-Dec-19	$20,700	$5,148	$35,925
31-Dec-20	$20,700	$3,593	$18,818
31-Dec-21	$20,700	$1,882	$0

Journal Entries - Bonita Inc.
Date	Particulars	Debit	Credit
31-Dec-17	Cash Dr	$41,400.00
	Note Receivables Dr	$65,616.00
	To Service Revenue		$107,016.00
	(Being service rendered to Beghun Corporation)
31-Dec-18	Cash Dr	$20,700.00
	To Note receivables		$20,700.00
	(Being first installment on notes received)
31-Dec-18	Note Receivables Dr	$6,562.00
	To Interest Income		$6,562.00
	(Being interest income on note recorded)
31-Dec-19	Cash Dr	$20,700.00
	To Note receivables		$20,700.00
	(Being 2nd installment on notes received)
31-Dec-19	Note Receivables Dr	$5,148.00
	To Interest Income		$5,148.00
	(Being interest income on note recorded)
31-Dec-20	Cash Dr	$20,700.00
	To Note receivables		$20,700.00
	(Being 3rd installment on notes received)
31-Dec-20	Note Receivables Dr	$3,593.00
	To Interest Income		$3,593.00
	(Being interest income on note recorded)
31-Dec-21	Cash Dr	$20,700.00
	To Note receivables		$20,700.00
	(Being 2nd installment on notes received)
31-Dec-21	Note Receivables Dr	$1,882.00
	To Interest Income		$1,882.00
	(Being interest income on note recorded)