Answer:
<u>Transaction in 2015:</u>
Nov 1 2015
Dr Loan Receivable 30,000
Cr Cash 30,000
( to record loan to Manny Lopez)
Dec 11 2015
Dr Account Receivable 6,750
Cr Sales 6,750
(to record sales on account to Ralph Kremer)
16 Dec 2015
Dr Note Receivable 4,000
Cr Account Receivable 4,000
(to record note receipt in exchange for receivable from Joe Fernetti)
31 Dec 2015
Dr Interest Receivable 553
Cr Interest Income 553
<u>The collection of the Lopez note at its maturity in 2016:</u>
Nov 1 2016:
Dr Cash 33,042
Cr Interest Receivable 508
Cr Loan Receivable 30,000
Cr Interest income 2,534
( to record collection of loan from Lopez)
Explanation:
<u>Transaction in 2015:</u>
Nov 1: Cash loan is made so Cash decrease (Cr) and Loan Receivable increase (Dr)
Dec 11: Sales on account so Account receivable increases (Dr) and Sales increases (Cr)
Dec 16: Note is received in exchange of receivable, so Note receivable increases (Dr) and Receivable decreases (Cr)
Dec 31: Total interest income accrued on loan/receivables is recorded as Dr Interest receivable ( increase) and Cr Interest income (increase) and is calculated as:
Loan to Lopez + Receivable from Ralph + Receivable from Joe = 30,000 x 10% x 61/360 + 6,750 x 8% x 20/360 + 4,000 x 9% x 15/360 = 553.
<u>The collection of the Lopez note at its maturity in 2016:</u>
Total cash receipt = Principal + interest expenses = 30,000 + 30,000 x 10% x 365/360 = $33,042 and is recorded as Dr.
Interest income recorded in Interest receivable account in 2015 should be clear (Cr) at the amount of 30,000 x 10% x 61/360 = 501.
Another interest income earned in the year of 2016, calculated as 30,000 x 10% x (365-61)/360 = 2,534 is recorded ( Cr);
Loan receivable is cleared (Cr) at the principal amount of $30,000.
