Question

The following information is extracted from Tara Corporation’s accounting records:

May	1	Received a $6,000, 12%, 90-day note from V. Leigh, a customer.
	6	Received a $9,000, 10%, 120-day note from C. Gable, a customer.
	11	Sold the Leigh and Gable notes with recourse at the bank at 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively.
July	31	The July bank statement indicated that the Leigh note had been paid.
Aug.	10	Repaid the $10,000 borrowed on May 11.
Sept.	4	Received notice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed.
	23	Received the amount due from Gable.

Required:

Prepare journal entries to record the preceding information, assuming that Tara usually does not sell its notes. (Assume a 360-day year for the purposes of computing interest and round all calculations to the nearest penny.) General Ledger ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 126 Notes Receivable Dishonored 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 215 Recourse Liability 221 Notes Payable 231 Salaries Payable 242 Discount on Notes Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 431 Interest Income EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 601 Loss from Sale of Receivables 603 Gain from Sale of Notes 604 Gain from Collection of Dishonored Note 910 Income Tax Expense

Answer 1

L (4) 6,000 6.00 Jouonal entoy to becood the gluentoansactions by assuming The Company 7 usually does not sell Pls noles. Date Account +Hes and explanation 006 May Notes pecevable Al DO TO Accounts receivablo Al CTO ecood the notes neled Foom the Customed Leigh ) May Notes payable AIC DO 9.000 9,000 "TO Accounts decefvable alc CTO 200cd the notes recepved from the Gable) May 1 24,615-26 30000 311-24 15000.00 10000-00 32:50 194.00 84.00 84.00 Cash Alo Do (46,001 H7C8+ $8,913-7908) + $4,700(7) Discount on notes payable C") AIC DO loss o son of cefvables AIC OY C$ 102-53 +$ 208.91) TD Notes receivable Alc TO Notes payable Alc 70 Interest come Akl$2008)4$12.500) TO Resourse paby AK CTO de cood the loss on sale of Bccdable cool sowose labit) July Resourse I Paboly AC OD 31 To Gain Foon sale of notes Alc Co dood the note that not been pold) Aceguest Notes payable Alco To cash Alc Gto se cod the grecest collected on toaster of AR) Augusi- Interest expense Ale od 10 TD Discoont on roles payable Alc CTO record the Shterest poid) September 2esocrose Pły AK DO H "To notes detalle dishonored Alc TO Cash AI ($90004 $300+$10) 10 vecord the payment of amount tot have been dishonored by the bank) 10,000.00 lamo 300.00 300.00 84.00 84.00 84.00 Septembed Cash Al or C$ 9,310 + $ 56.89) 23 'TD Interesl-Prcome Al 69,310 X 14 X 20/360) 84.00