Question

On April 1, 2018, On April 1, 2018, Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker's business. The supplier explains that it has a temporary lack of funds that is slowing its production cycle. Shoemaker agrees to lend $570,000 to its supplier using a 12-month, 11% note. Required: 1. The loan of $570,000 and acceptance of the note receivable on April 1, 2018. 2. The adjustment for accrued interest on December 31, 2018. 3. Cash collection of the note and interest on April 1, 2019. Record the above transactions for Shoemaker Corporation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker's business. The supplier explains that it has a temporary lack of funds that is slowing its production cycle. Shoemaker agrees to lend $570,000 to its supplier using a 12-month, 11% note. Required: 1. The loan of $570,000 and acceptance of the note receivable on April 1, 2018. 2. The adjustment for accrued interest on December 31, 2018. 3. Cash collection of the note and interest on April 1, 2019. Record the above transactions for Shoemaker Corporation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

JOURNAL ENTRIES

1) Debit Note Receivable $570,000 Credit Bank $570,000

2) Debit Accrued Interest income $47,025 Credit Interest income $47,025

3) Debit Bank $632,700 Credit Note receivable $570,000 Credit Accrued interest income $47,025 Credit interest income $15,675

Explanation:

Interest income = $570,000 * 11% * 9/12 =  $47025 for 2018

interest income for 2019 = $570,000*11%*3/12 = $15,675

Answer 2

Answer:

Explanation:

1. April 1, 2018

Dr Notes Receivable 570,000

Cr Cash 570,000

2. Dec 31, 2018

Dr Interest Receivable 47,025

Cr Interest revenue 47,025

*Interest Revenue = Face value*Annual int. rate*Fraction of the year = 570,000*11%*9/12 = 47,025

3. April 1, 2019

Dr Cash 632,700

Cr Notes receivable 570,000

Cr Int receivable 47,025

Cr Int revenue 15,675

*Int revenue = 570,000*11%*3/12 = 15,675