Question

On December 1, 2021, Liang Chemical provides services to a customer for $78,000. In payment for the services, the customer signs a three-year, 12% note. The face amount is due at the end of the third year, while annual interest is due each December 1.

Required:

1. Record the acceptance of the note on December 1, 2021.
2. Record the interest collected on December 1 for 2022 and 2023, and the adjustment for interest revenue on December 31 for 2021, 2022, and 2023.
3. Record the cash collection on December 1, 2024.

Prepare the journal entries for the above transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Solution:
Journal Entries
Date	ACCT Title and explanation	Debit	Credit
Dec 01. 2021	Note Receivable	$                   78,000
	Service Revenue		$                   78,000
Dec 31. 2021	Interest Receivable ($ 78,000 X 12% / 12 Month)	$                         780
	Interest Revenue		$                         780
Dec 01. 2022	Cash ($ 78,000 X 12%)	$                     9,360
	Interest Receivable		$                         780
	Interest Revenue ($78,000 X 12% *11/12 Month)		$                     8,580
Dec 31. 2022	Interest Receivable ($ 78,000 X 12% / 12 Month)	$                         780
	Interest Revenue		$                         780
Dec 01. 2023	Cash ($ 78,000 X 12%)	$                     9,360
	Interest Receivable		$                         780
	Interest Revenue		$                     8,580
Dec 31. 2023	Interest Receivable ($ 78,000 X 12% / 12 Month)	$                         780
	Interest Revenue		$                         780
Dec 01. 2024	Cash	$                   87,360
	Interest Receivable		$                         780
	Interest Revenue		$                     8,580
	Note Receivable		$                   78,000