Question

On December 31, 2020, Tobita Company had the following balances reported on its balance sheet: Notes Receivable $17,700 Interest Receivable $97.00 The following information is available for the notes receivable reported on December 31, 2020. Customer Note Principal Interest Rate Issue Date Term Interest Accrued 1 E. Tessier $5,100 5.00% Nov. 1, 2020 3 months $42.50 2 R. Wolde 5,100 4.00% Nov. 30, 2020 5 months 17.00 3 D. Deng 7,500 6.00% Dec. 1, 2020 1 year 37.50 Total $17,700 Total $97.00 All notes require that the interest be paid on the maturity date of the note. All amounts owing on the notes were paid on time. Tobita prepares annual adjusting entries on December 31, the company’s year end. Additional transactions of 2021: Mar. 1 Received a $14,100, twelve-month, 5.00% note from T. Lalonde in settlement of an accounts receivable. Interest is due at maturity. Oct. 30 Received a $6,900, three-month, 4.00% note from J. Han in settlement of an accounts receivable. Interest is due at maturity. Dec. 1 Provided a $10,000 loan to Morgan Industriesin exchange for a two-year, 6.00% note with interest due at maturity. Interest on the note is payable each year on November 30.

1) Prepare all required journal entries related to the notes receivables during 2021.

2) Show the amount and presentation for interest revenue on Tobita’s multiple-step income statement for the year ended December 31, 2021

3) Show how the notes receivable will be reported on Tobita’s classified balance sheet on December 31, 2021. There were no estimated uncollectible amounts for the notes receivable.

Answer 1

Answer 1:

	Title			Debit(in $)	Credit(in $)
Feb 1,2021	Cash			5,163.75
	Interest revenue [5100 x 5% x 1/12]				21.25
	Interest receivable				42.50
	Notes receivable				5,100.00
Mar 1,2021	Notes receivable			14,100.00
	Accounts receivable				14,100.00
Apr 30,2021	Cash			5,185.00
	Interest revenue [5,100 x 4% x 4/12]				68.00
	Interest receivable				17.00
	Notes receivable				5,100.00
Oct 30,2021	Notes receivable			6,900.00
	Accounts receivable				6,900.00
Dec 1,2021	Notes receivable			10,000.00
	Cash				10,000.00
Dec 1,2021	Cash			7,950.00
	Interest revenue [7,500 x 6% x 11/12]	412.50
	Interest receivable				37.50
	Notes receivable				7,500.00

Answer 2:

Tobita Merchants
Income Statement (Partial)
year end Dec 31,2021
Non-operating income and Expense:
Interest revenue(in $)	683.50

Answer 3:

Tobita Merchants(in $)
Balance Sheet (Partial)
year end Dec 31,2021
Current Assets:
Notes receivable	21,000.00
Interest receivable
Non-current Assets:
Notes receivable	10,000