In: Accounting
QUESTION 3:
Alphas Company had the following events during FY 2017:
Mar. 1 – Accepted Bravo Company’s 4 month, 9% note, as settlement of an outstanding $18,000 accounts receivable for goods sold in the prior year.
Mar. 15 – Sold, $27,200 of equipment (from merchandise inventory) to Charlie Company and accepted 9 months, 6% note.
Mar. 21 – Loaned Delta Company $22,800 cash and accepted a 90 days, 9% note.
June. 19 – Received payment from Delta Company.
July 1 – Received payment from Bravo Company.
Dec. 16 – Received payment from Charlie Company.
Alpha Company uses the periodic system for inventory sales and prepares quarterly adjusting entries. Use this information to prepare the compound General Journal entries (without explanation) for all events related to the notes. Students may add the company names after the note receivable account names to further identify the various subsidiary note transactions.
Calculations for any interest must be done on a standard 365 day year for notes where the term is set in days. Use whole months (or fractions thereof) for notes with term limits set in months or years.
General Journal
Date |
Accounts |
Debit |
Credit |
Mar. 1 |
|||
Mar. 15 |
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Mar. 21 |
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Mar. 31 |
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June 19 |
|||
June 30 |
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July 1 |
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Sept. 30 |
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Dec. 16 |
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journal entries :
date | particulars | l/f | debit | credit |
1 mar | bravo note receivable a/c dr | 18000 | ||
to account receivable a/c | 18000 | |||
(being accepted note of bravo's compant 9% note) | ||||
15 mar | charlie note receivable a/c dr | 27200 | ||
to sales / account receivable a/c | 27200 | |||
(being sold of equipment to charlie) | ||||
21 mar | delta note receivable a/c dr | 22800 | ||
to cash a/c | 22800 | |||
(accepted 9% note and paid cash) | ||||
31 mar | interest receivable a/c dr (working note 1) | 250 | ||
to interest revenue a/c | 250 | |||
(being interest calculated) | ||||
19 june | cash a/c dr | 23305.37 | ||
to interest receivable a/c (working note 1) | 50 | |||
to interest revenue a/c (working note 2) | 455.37 | |||
to delta note receivable a/c | 22800 | |||
(being delta account settled) | ||||
30 june | interest receivable a/c dr (working note 3) | 813 | ||
to interest revenue a/c | 813 | |||
(being interest calculated) | ||||
1 july | cash a/c dr | 18538 | ||
to interest receivable a/c (working note 4) | 538 | |||
to bravo note receivable a/c | 18000 | |||
(being bravo iaccount settled) | ||||
30 sep | interest receivble a/c dr (working note 3) | 408 | ||
to interest revenue a/c | 408 | |||
(being interest calculated) | ||||
16 dec | cash a/c dr | 28478 | ||
to interest receivable a/c (27200 * 0.06 (211 / 365)) | 943 | |||
to interest revenue a/c (27200 * 0.06 (75 / 365)) | 335 | |||
to charlie note receivable a/c | 27200 | |||
(being charlie account settled) |
working note 1 :
calculation of interest at quarter end :
interest = note value * rate * (number of days / 365)
bravo interest = 18000 * 0.09 * (30 / 365) = 133
charlie interest = 27200 * 0.06 * (15 / 365) = 67
delta interest = 22800 * 0.09 * (9 / 365) = 50
total interest = 133 + 67 + 50 = 250
working note 2 :
interest revenue of delta :
total interest revenue = 22800 * 0.09 * (81 / 365)
= 455.37
working note 3 :
calculate interest on 30 june :
bravo interest = 18000 * 0.09 * (3 / 12) = 405
charlie interest = 27200 * 0.06 *(3 / 12) = 408 (also 30sep)
total interest receivable = 813
working note 4 :
total interest of bravo = interest of mar 31 ended + interest of june 30
= 133 + 405
= 538