Question

On October 1, 2021, Oberley Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022 Interest Revenue Year 2021 2022

Answer 1

Solution of the above problem is as under:

Summary
Statement reflecting Amount of Interest Revenue Oberley will recognize in 2021 and 2022
Year	Working ($)	Interest Revenue ($)
2021	40000 X 9% X 3/12	900
2022	40000 X 9% X 9/12	2700

Explanation is as under:

Date	Account Title and Explanation	Debit ($)	Credit ($)
Oct-01,2021	9% Note Receivable A/c Dr.	40000
	To Cash A/c		40000
	(Being Oberley Corporation lends money to one of its Employee)
Dec-31,2021	Interest Receivable A/c Dr.	900
	To Interest Revenue		900
	(Being 3-Months Interest Accrued on 9%Notes recorded)
Sep-30,2022	Interest Receivable A/c Dr.	2700
	To Interest Revenue		2700
	(Being remaining 9 Months Interest Accrued o 9% Notes recorded in the year 2022)

Solution of Question-2

Account Title and Explanation	Debit ($)	Credit ($)
Bad Debt Expense A/c Dr.	4040
To Allowance for Uncollectible Accounts		4050
(Being allowance created using percentage of net sales method)

Note: Though, Allowance for Uncollectible Accounts have a credit balance of $4000, the adjusting entry would still be for $4050 (3% of $135000). However, Balance Sheet would reflect a Gross amount of $(4000+4050) .i.e $ 8050 under allowance for Bad Debt Account.