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. Jan. 14 $33,000 4% 30 days 2. Mar. 9 60,000 7 45 days 3. July 12 48,000 5 90 days 4. Aug. 23 16,000 6 75 days 5. Nov. 15 36,000 8 60 days 6. Dec. 10 24,000 6 60 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 and February.
Answer:
1.
Note
1. $110
2. 525
3. 600
4. 200
5. 480
6. Feb. 8 240
2. Oct. 10 Accounts Receivable48,600
Notes Receivable48,000
Interest Revenue600
3. Dec. 31 Interest Receivable452
Interest Revenue452
Accrued interest.
$36,000 × 8% × 46 ÷ 360 = $368
$24,000 × 6% × 21 ÷ 360 = 84
Total $452
4. Jan. 14 Cash36,480
Notes Receivable36,000
Interest Receivable368
Interest Revenue112
($36,000 × 8% × 14 ÷ 360).
Feb. 8 Cash24,240
Notes Receivable24,000
Interest Receivable84
Interest Revenue156
($24,000 × 6% × 39 ÷ 360).