Question

Details of Notes Receivable and Related Entries

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

	Date	Face Amount		Interest Rate		Term
1.	Apr. 10	$93,000		4	%	60	days
2.	June 24	14,400		6		30	days
3.	July 1	36,000		6		120	days
4.	Oct. 31	36,000		9		60	days
5.	Nov. 15	54,000		6		60	days
6.	Dec. 27	162,000		4		30	days

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.

Due Date	Interest Due at Maturity
(1)	$
(2)
(3)
(4)
(5)
(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".

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

Dec. 31

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".

Jan. 14
Jan. 26

Answer 1

1)

	Due date	Interest due at maturity
1	10April +60 days = 9 June	93000*.04*60/360=620
2	June24+30 days =24 july	14400*.06*30/360=72
3	July1+120 = 29 oct	36000*.06*120/360=720
4	oct 31+60 = 30 dec	36000*.09*60/360=540
5	Nov 15+ 60 = 14 jan (next year)	54000*.06*60/360=540
6	Dec 27+30 = 26 jan (next year)	162000*.04*30/360=540

2)

Date	Account	Debit	credit
29 oct	Accounts receivable	36720
	Note receivable		36000
	interest revenue		720
	[note dishonured]

3)

Date	Account	Debit	credit
31 dec	Interest receivable	486
	Interest revenue [414+72]		486

**interest accrued on note 5 :54000*.06*46/360=414

Interest acrrued on note 6 :162000*.04*4/360=72

4)

Date	Account	debit	credit
14 jan	Cash	54540
	Interest receivable		414
	Interest revenue [540-414]		126
	note receivable		54000
26 jan	cash	162540
	Interest receivable		72
	Interest revenue [540-72]		468
	note receivable		162000
	[note 6 collected]