Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:
Date Face Amount Interest Rate Term 1. Mar. 6 $80,000 5% 45 days 2. Apr. 23 24,000 9 60 days 3. July 20 42,000 6 120 days 4. Sept. 6 54,000 7 90 days 5. Nov. 29 27,000 6 60 days 6. Dec. 30 72,000 5 30 days
Instructions
1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.
2. Journalize the entry to record the dishonor of Note (3) on its due date.
3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.
4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January.
Answer:
1.
Note
1. $500
2. 360
3. 840
4. 945
5. 270
6. Jan. 29 300
2. Nov. 17 Accounts Receivable42,840
Notes Receivable42,000
Interest Revenue840
3. Dec. 31 Interest Receivable154
Interest Revenue154
Accrued interest.
$27,000 × 6% × 32 ÷ 360 = $144
$72,000 × 5% × 1 ÷ 360 = 10
Total $154
4. Jan. 28 Cash27,270
Notes Receivable27,000
Interest Receivable144
Interest Revenue126
($27,000 × 6% × 28 ÷ 360).
29 Cash72,300
Notes Receivable72,000
Interest Receivable10
Interest Revenue290
($72,000 × 5% × 29 ÷ 360).