Question

Exercise 7-14 On December 31, 2015, Shamrock Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Shamrock Co. agreed to accept a $324,900 zero-interest-bearing note due December 31, 2017, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 11%. Shamrock is much more creditworthy and has various lines of credit at 6%. Prepare the journal entry to record the transaction of December 31, 2015, for the Shamrock Co. (Round present value factor calculations to 5 decimal places, e.g.1.25124 and final answers to O decimal places, e.g.5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually) Dec. 31, 2015 Assuming Shamrock Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2016. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Dec. 31, 2016 LEST OF ACCOUNTS Assuming Shamrock Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Accost Tales and Esplanatien Dec. 31, 2017 To record interest revenue) To record collection of note)

Answer 1

Solution:-

1. Prepare the journal entry to record the transaction of December 31, 2015, for the Ed Shamrock Co.:-

Date	Account titles and explanation	Debit	Credit
Dec. 31,2015	Notes receivable	324,900
	Discount on notes receivable (324,900 - 263,696)		61,204
	Service revenue		263,696

2. Assuming Shamrock Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2016:-

Date	Account titles and explanation	Debit	Credit
Dec. 31,2016	Discount on notes receivable	29,007
	Interest revenue $(\frac{324,900*0.11}{(1.11)^{2}})$		29,007

3. Assuming Shamrock Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2017:-

Date	Account titles and explanation	Debit	Credit
Dec. 31,2017	Discount on notes receivable	32,197
	Interest revenue $(\frac{324,900*0.11}{(1.11)})$		32,197
	(To record interest revenue)
	Cash	324,900
	Notes receivable		324,900
	(To record collection of notes)