Question

On June 30, 2018, the Esquire Company sold some merchandise to a customer for $44,000. In payment, Esquire agreed to accept a 7% note requiring the payment of interest and principal on March 31, 2019. The 7% rate is appropriate in this situation. Required 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2018 interest accrual, and the March 31, 2019 collection 2. If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2018 and 2019? Complete this question by entering your answers in the tabs below. Required 1Required 2 Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2018 interest accrual, and the March 31, 2019 collection. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the sale of merchandise Note: Enter debits before credits Date General Journal Debit Credit June 30, 2018 Record entry Clear entry View general journal Required 1 Required 2>

Answer 1

Answers

--Requirement 1

Date	Accounts title	Debit	Credit
30-Jun-18	Notes receivables	$44,000
	Sales revenue		$44,000
	(Notes received for sale on account)
31-Dec-18	Interest Receivable [44000 x 7% x 6/12]	$1,540
	Interest Revenue		$1,540
	(6 month interest accrued to be received)
31-Mar-19	Cash	$46,310
	Notes receivables		$44,000
	Interest receivable		$1,540
	Interest Revenue [44000 x 7% x 3/12]		$770
	(Amount received at maturity)

--Requirement 2

>2018 Net Income would be under stated by $ 1,540, and
>2019 Net Income would be over stated by $ 1540 if adjusting entry for $ 1540 had not been recorded.