Question

Details of Notes Receivable and Related Entries

Gen-X Ads Co. produces advertising videos. During the current year ending December 31, Gen-X Ads received the following notes:

	Date	Face Amount		Term		Interest Rate
1.	Apr. 10	$84,000		60	days	4	%
2.	June 24	18,000		30	days	6
3.	July 1	81,000		120	days	6
4.	Oct. 31	81,000		60	days	5
5.	Nov. 15	90,000		60	days	6
6.	Dec. 27	144,000		30	days	4

Required:

Assume 360 days in a year.

1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.

Note	(a) Due Date	(b) Interest Due at Maturity
(1)	June 9	$
(2)	July 24
(3)	Oct. 29
(4)	Dec. 30
(5)	Jan. 14
(6)	Jan. 26

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

2. Journalize the entry to record the dishonor of Note (3) on its due date. If an amount box does not require an entry, leave it blank or enter "0".

	Accounts Receivable
	Notes Receivable
	Interest Revenue

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.

Dec. 31	Interest Receivable
	Interest Revenue

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. If an amount box does not require an entry, leave it blank or enter "0".

Note 5	Cash
	Notes Receivable
	Interest Receivable
	Interest Revenue
Note 6	Cash
	Notes Receivable
	Interest Receivable
	Interest Revenue

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

Answer 1