Question

Following are selected transactions of Danica Company for 2017 and 2018 2017 Dec. 13 Accepted a $9,500, 45-day, note dated December 13 in granting Miranda Lee a time extension on her past due account receivable. 31 Prepared an adjusting entry to record the accrued interest on the tee note. 2018 Jan. 27 Received Lee's payment for principal and interest on the note dated December 13. Mar. Accepted a $5,000, 105, 90-day note dated March 3 in granting a time extension on the past due account receivable of Tomas Company. 17 Accepted a $2,000, 30-day, 9% note dated March 17 in granting H. Cheng a time extension on his past due account receivable. Apr. 16 H. Cheng dishonored his note when presented for payment. May 1 wrote off the H. Cheng account against the Allowance for Doubtful Accounts. June 1 Received the Tomas payment for principal and interest on the note dated March 3. Complete the table to calculate the interest amounts and use those calculated values to prepare your journal entries. (Do not round your intermediate calculations. Use 360 days a year.)

Answer 1

interest Recogniz- fed January 27 $ 9,500 M. Lee Note: Amount Accrued Total Through Maturity / wiry at December 31. Principal I & 9,500 $ 9,500 Rate (2/6) Time I 45/360 18/360 38 Total interest 8 27/60 57 95 December 13 January 1 to December 31 = 18 days to January 27 = 27 days Tomas co Note: Total There Principal Rate (%) Time Total interest Maturity $5,000 10 90/360 125

H. Cheng Note: Principal Rate (%) Time Total interest Total through Maturity $ 5,000 10 % 90/360 125 Credit Date Joon 27, 2018 Debit $ 9,595 General Journal Cash Interest revenue Interest receivable Notes receivable - M, Lee (To record cash received) $57 $ 38 $ 9,500 Mano3, 2018 $ 5,000 Notes receivable - Tomasco Accounts receivable - Tomas Co (to record notes receivable) 1 $ 5,000 2,000 Mar 11, 2018 Notes receivable - H. Cheng Accounts receivable- H. Cheng (to record notes receivable) $ 2,000 & 2015 $ 15 Apm-16, 2018 Accounts receivable-H. Cheng . Interest revenue Notes receivable - H. Cheng To record receivable for dishonored $ 2,000 $2.015 $ 2,015 May 1, 2018 Allowance for doubtful accounts Accounts receivable -Hi Cheng (fouecord allowance for doubtful accounts

$5,125 June 1, 2018 Cash Interest revenue Notes receivable-Tomas Co I to record cash received on note) $ 125 $5,000 Calculation: Jan 27, 2018 Interest revenue = $ 9,500 X 8). X ( 45 days 18 days)/360 days = $9,500 x 8% X 27/360 days = $57 Cash Interest revenue & interest receivable + Notes receivable -- M.Lee = $ 57 + $ 38 + $ 9,500 = $ 9,595 April 16, 2018 Interest revenue = $2,000 4 90% x 30/360 days = $15 Accounts receivable = $2,000 + $15 = $ 2,615 June 1, 2018 Interest Cash = = = revenue = $5,000 × 101.8 90/360 days, = $ 125 Interest revenue & Notes receivable - Thomas 125 + $5,000 $ 5,125