Question

 Water Closet Co. wholesales bathroom fixtures. During the current year ending December 31, Water Closet received the following notes:

 Required:

 1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. Assume a 360-day year. (Note: Round each interest computation to the nearest cent.)

 2. Journalize the entry to record the dishonor of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles.

 3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. (Note: Round each interest computation to the nearest cent.)

 4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January and February. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

1.

Note	Due Date	Face Amount	No of days to maturity	Interest rate	Interest due at Maturity [Face amount * no days / 360 * Interest rate]
1	Mar 6	75000	60	4%	500
2	Apr 7	40000	45	9%	450
3	Aug 12	36000	120	6%	720
4	Oct 22	27000	30	6%	135
5	Nov 19	48000	90	9%	1080
6	Dec 15	72000	45	6%	540

2.

No	Date	Description	Debit	Credit
2	Dec 10	Accounts receivable	36720
		Notes receivable		36000
		Interest revenue		720
3	Dec 31	Interest receivable	696
		Interest revenue		696
		[(48000*42/360*9%)+(72000*16/360*6%)]
4	Jan 29	Cash	49080
		Notes receivable		48000
		Interest receivable [(48000*42/360*9%)]		504
		Interest revenue [(48000*48/360*9%)]		576
	Feb 17	Cash	72540
		Notes receivable		72000
		Interest receivable [(72000*16/360*6%)]		192
		Interest revenue [(72000*29/360*6%)]		348