Q8_40PGB Question: Consider the following... [FREE SOLUTION]

Chapter 8: Q8_40PGB (page 482)

Question: Consider the following transactions for TLC Company.
2018
Dec. 6 Received a $8,000, 90-day, 9% note in settlement of an overdue accounts
receivable from Forest Music.
31 Made an adjusting entry to accrue interest on the Forest Music note.
31 Made a closing entry for interest revenue.
2019
Mar. 6 Collected the maturity value of the Forest Music note.
Jun. 30 Loaned $14,000 cash to Washington Music, receiving a six-month, 12% note.
Oct. 2 Received a $1,000, 60-day, 12% note for a sale to ZZZ Music. Ignore Cost of
Goods Sold.
Dec. 1 ZZZ Music dishonored its note at maturity.
1 Wrote off the receivable associated with ZZZ Music. (Use the allowance
method.)
30 Collected the maturity value of the Washington Music note

Expert verified

Answer:

Journal entries are recorded in Step 2.

The note鈥檚 maturity date is the date when the notes become due for the payment.

Date	Particulars	Debit	Credit
December 6, 2018	Note Receivable	$8,000
	Accounts Receivable		$8,000
	(To record notes issued)

December 31, 2018	Interest Receivable ($80009%25/365)	$49
	Interest Revenue		$49
	(To record accrued revenue)

December 31, 2018	Interest Revenue	$49
	Income Summary		$49
	(To record closure of accrued revenue)
2019
March 6	Cash	$8,178
	Notes Receivable		$8,000
	Interest Receivable		$49
	Interest Revenue ($80009%65/365)		$129
	(To record cash received on maturity)

June 30	Notes Receivable- Washington Music	$14,000
	Cash		$14,000
	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

	(To record notes issued)

October 2	Notes Receivable	$1,000
	Sales revenue		$1,000
	(To record sales revenue)

December 1	Accounts Receivable	$1,020
	Notes Receivable		$1,000
	Interest Receivable ($1,00012%60/365)		$20
	(To record notes dishonoured)

December 1	Bad Debt Expense	$1,020
	Allowance For Bad Debts		$1,020
	(To record bad debt expense)

December 30	Cash	$14,840
	Notes Receivable		$14,000
	Interest Revenue ($14,00012%6/12)		$840
	(To record cash received of notes on maturity.)

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2018
Jul. 1	Loaned \(16,000 cash to Bud Shyne on a one-year, 8% note.
Sep. 6	Sold goods to Lawn Pro, receiving a 90-day, 6% note for \)11,000. Ignore Cost of Goods Sold.
30	Made a single entry to accrue interest revenue on both notes.
?	Collected the maturity value of the Lawn Pro note.
2019
Jul. 1	Collected the maturity value of the Shyne note.

2018
Apr.28	Performed service on account for Parkview Club, \(18,000.
Sep. 1	Received an \)18,000, 60-day, 12% note from Parkview Club in satisfaction of its past-due account receivable.
Oct. 31	Collected the Parkview Club note at maturity