Question

On July 1, 2018, Regal Corporation obtained a $15,000 note receivable from a cutomer. The note along with interest at 8% is due on December 31, 2018. On August 30, 2018, Regal discounted the note at First City Bank. The bank's discount rate is 10%. Prepare the journal entries required on August 30, 2018 to accrue interest and to record the discounting for Regal (round all calculations to two decimal points).

Answer 1

Journal Entries
Date	Account Title and explanation	Debit	Credit
Aug 30 , 2018	Cash	$                  14,700
	Discounting Charges ($ 15,000 X 10% X 4/12)	$                        500
	Note Receivable		$                     15,000
	Interest Revenue($ 15,000 X 8% X 2 / 12 )		$                           200
	Note:
	1 - Note receivable is carrying 8% interest rate which is payable at maturity
	2- Interest @ 8% is receivable for 2 months
	3 - Interest @ 10% is payable as discounting charges for 4 months