Question

Jasper makes a $25,000, 90-day, 7% cash loan to clayborn co. jasper's entry to record the collection of the note and interest at maturity should be:

Answer 1

Answer:

The journal entry is as follows:

Cash A/c Dr. $ 25,437.50

      To Notes Receivable A/c   $25,000

      To Interest revenue A/c     $437.50

(To record the collection of the note and interest at maturity)

Working notes:

Interest for 90 Days:

= Note value × Interest rate × Time period

= $25,000 × 0.07 × (90/360) days

= $437.50