Answer:
The journal entries are given below.
Explanation:
(1) The loan to Small Co.
Date Account Title Debit Credit
June 1, 2016 Notes receivable 20,000
Cash 20,000
(2) The adjusting entry at December 31, 2016.
= $20,000 * 6% = $1200
To calculate the interest for seven months = = $700
Date Account Title Debit Credit
Dec 31, 2016 Interest receivable 700
Interest revenue 700
(3) The adjusting entry and collection of the note on June 1, 2017.
The adjusting entry on June 1, 2017 would be:
= = $500
Date Account Title Debit Credit
June 1, 2017 Interest receivable 500
Interest revenue 500
Collection of the note on June 1, 2017.
Date Account Title Debit Credit
June 1, 2017 Cash 21,200
Notes receivable 20,000
Interest receivable 1,200