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	$63,000		4%		60	days
2.	June 24	14,400		6		30	days
3.	July 1	45,000		6		120	days
4.	Oct. 31	45,000		9		60	days
5.	Nov. 15	90,000		6		60	days
6.	Dec. 27	144,000		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.

Note	(a) Due Date	(b) 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

Check My Work

Answer 1

1.

Date	Amount	Interest Rate	Term	Due Date	Interest
Apr-10	$         63,000	4%	60	Jun-09	$       420
Jun-24	$         14,400	6%	30	Jul-24	$         72
Jul-01	$         45,000	6%	120	Oct-29	$       900
Oct-31	$         45,000	9%	60	Dec-30	$       675
Nov-15	$         90,000	6%	60	Jan-14	$       900
Dec-27	$      144,000	4%	30	Jan-26	$       480

2.

Date	Account Titles	Debit	Credit
Oct-29	Accounts Receivable	$          45,900
	Notes Receivable		$         45,000
	Interest Revenue		$               900
	(Dishonor of Note 3)

3.

Date	Account Titles	Debit	Credit
Dec-31	Interest Receivable	$               754
	Interest Revenue		$               754

4.

Date	Account Titles	Debit	Credit
Jan-14	Cash	$          90,900
	Notes Receivable		$         90,000
	Interest Receivable		$               690
	Interest Revenue		$               210
	(Collection of Note 5)
Jan-26	Cash	$        144,480
	Notes Receivable		$       144,000
	Interest Receivable		$                 64
	Interest Revenue		$               416
	(Collection of Note 6)