Q32PGA Accounting for notes receivable ... [FREE SOLUTION]

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Chapter 8: Q32PGA (page 477)

Accounting for notes receivable and accruing interestCarley Realty loaned money and received the following notes during 2018.Note Date Principal Amount Interest Rate Term
(1) Apr. 1 $ 6,000 7% 1 year
(2) Sep. 30 12,000 6% 6 months
(3) Sep. 19 18,000 8% 90 days
Requirements
1. Determine the maturity date and maturity value of each note.
2. Journalize the entries to establish each Note Receivable and to record the collection ofprincipal and interest at maturity. Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note.Explanations are not required. Round to the nearest dollar.

Short Answer

Expert verified

(1) Maturity date and maturity value

Note 1- 31 March 2019 and $6,420

Note 2- 31 March 2019 and$12,360

Note 3- 18 December 2018 and $18,355

(2) Journal entries are recorded in Step 3

Step by step solution

Definition of the maturity date

The maturity date of the note is the date at which the notes become due. On the maturity date, the amount of the notes receivable is received by the company.

Maturity date and maturity value

Note	Date	Principal	Time	Maturity date	Year	Value
1	April 1	$6,000	One year	31 March	2019	$6,420
2	September 30	$12,000	Six months	31 March	2019	$12,360
3	September 19	$18,000	90 days	18 December	2018	$18,355

Note 1-

$\begin{matrix} 滨苍迟别谤别蝉迟=鈥塒谤颈苍肠颈辫补濒脳滨苍迟别谤别蝉迟脳罢颈尘别 \\ =$6,000脳鈥�7%脳1 \\ =$420 \end{matrix}$

Note 2-

$\begin{matrix} 滨苍迟别谤别蝉迟=鈥塒谤颈苍肠颈辫补濒脳滨苍迟别谤别蝉迟脳罢颈尘别 \\ = \frac{$ 12, 000 脳 6 % 脳 6}{12} \\ =$360 \end{matrix}$

Note 3-

$\begin{matrix} 滨苍迟别谤别蝉迟=鈥塒谤颈苍肠颈辫补濒脳滨苍迟别谤别蝉迟脳罢颈尘别 \\ = \frac{$ 18, 000 脳 8 % 脳 90}{365} \\ =$355 \end{matrix}$

Journal entries

Date	Particulars	Debit	Credit
April 1, 2018	Notes Receivable	$6,000
	Cash		$6,000
	(To entry for notes receivable)

September 30, 2018	Notes Receivable	$12,000
	Cash		$12,000
	(To entry for notes receivable)

September 19, 2018	Notes Receivable	$18,000
	Cash		$18,000
	(To entry for notes receivable)

December 18, 2018	Cash	$18,360
	Notes Receivable		$18,000
	Interest receivable		$360
	(To notes receivable-3 is collected on maturity)

December 31, 2018	Interest Receivable	$315
	Interest revenue		$315
	(To interest accrues on note 1)

December 31, 2018	Interest Receivable	$180
	Interest Revenue		$180
	(To interest revenue accrue on note 2)

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	2018	2017
Net Credit Sales	\( 594,920	\)602,000
Net Receivables at end of year	38,500	47,100

1. Accounts receivable	a. The party to a credit transaction who takes on an obligation/payable.
2. Other receivables	b. The party who receives a receivable and will collect cash in the future.
3. Debtor	c. A written promise to pay a specified amount of money at a particular future date.
4. Notes receivable	d. The date when the note receivable is due.
5. Maturity date	e. A miscellaneous category that includes any other type of receivable where there is a right to receive cash in the future
6. Creditor	f. The right to receive cash in the future from customers for goods sold or for services performed.

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Short Answer

Step by step solution

Definition of the maturity date

Maturity date and maturity value

Journal entries

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