Question

(g) Prepare Journal Entries for Notes Receivable Akron Corporation engaged in the following transactions involving promissory notes in 20x1 and 20x2. 20x1 Sept. 1 Sold land to Marge Bailey for $160,000. A 6-month, 7 percent note was received in exchange. Cost of the land was $160,000. Nov. 1 Received a 30-day, non-interest bearing note from Fred Hansen in settlement of his accounts receivable of $4,000. Dec. 1 Fred Hansen dishonored his note issued 30 days earlier. Dec. 31 Recorded accrued interest for December only (not September - November) on the note received from Marge Bailey. 20x2 Mar. 1 Received payment in full from Marge Bailey. Assume that all interest has already been accrued to the end of February but no cash receipt has been recorded. Journalize these transactions in the journal provided. Explanations are not needed. Akron records adjusting entries monthly. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

1. General Journal (Amounts in $)

Date	Accounts Title and Description	Debit	Credit
20X1
Sept 1	Notes Receivable	160,000
	Land		160,000
	(To record sale of land)
Nov 1	Notes Receivable	4,000
	Accounts Receivable		4,000
	(To record notes received from Fred Hansen)
Dec 1	Accounts Receivable	4,000
	Notes Receivable		4,000
	(To record dishonored Note)
Dec 31	Interest Receivable a	933
	Interest Revenue		933
	(To record accrued Interest)
20X2
March 1	Cash	165,600
	Notes Receivable		160,000
	Interest Revenue b		5,600
	(To record the amount received from note)

Working Notes:

a) Calculation of Interest for the month of December =(160,000*7%)/12

= $11,200/12 = $933

b) Calculation of Interest Revenue from September to December = (160,000*7%)/2

=$5,600