Question

Troy Canvas WebExpress T Troy Catalogs Academic Evaluat... The Knot PT Pottery Barn B Bed Bath and Bey. Tarpet eBook Show Me How Calculator Entries for Notes Receivable, including Year-End Entries The following selected transactions were completed by Fasteners Inc. Co., a supplier of buttons and zippers for clothing: 2013 Nov. 21. Received from McKenna Outer Wear Co., on account, a $96,000, 60-day, 3% note dated November 21 in settlement of a past due account Dec. 31. Recorded an adjusting entry for accrued interest on the note of November 21 2014 Jan. 20. Received payment of note and interest from McKenna Outer Wear Co. an amount box does not require an entry, leave it blank. Assume a 360-day year when Journalize the entries to record the transactions. For a compound transaction, calculating interest 2073, Nov. 21 - Dec. 31 2014. jan. 20

Answer 1

Answer :-

Journal entries to record the transaction are as follows :-

Date	Particular	Debit	Credit
20Y3,Nov 21	Note receivable A/c Dr	$96,000
	To Account receivable A/c		$96,000
	( To record note received from McKenna Outer Wear Co.)
Dec 31	Interest receivable A/c Dr.	$320
	To Interest revenue A/c (Note -1)		$320
	(To record the adjusting entry for accrued interest on the note )
20Y4,Jan 20	Cash A/c. Dr.	$96,480
	To Note receivable A/c		$96,000
	To Interest Receivable A/c		$320
	To Interest revenue A/c (Note - 2)		$120
	(To record payment received of note and interest)

Note 1 :-

Given,Note receivable = $96,000

Rate = 3%

No.of day in a year = 360 days

On December 31,we calculate the interest revenue of 40 days as Note issued on November 21.

Interest revenue = $96,000 × 3% × 40/360 = $320

Note 2:-

On January 20,we calculate the interest Revenue of 20 days only as we already calculate the 30 days interest revenue in adjusting entry.

Interest revenue = $96,000 × 3% × 20/360 = $160