Answer:
Kelly Realty
1. Determination of Maturity Date and Value for each note:
Note Principal Interest Rate Maturity Date Maturity Value
1. $28,000 6% Sept. 30 2019 $29,680
2. $22,000 10% March 31, 2019 $23,650
3. $14,000 14% Dec. 18, 2018 $14,490
b) Journal Entries to record receivables:
October 1:
Debit 6% Notes Receivable $28,000
Credit Cash Account $28,000
June 30:
Debit 10% Notes Receivable $22,000
Credit Cash Account $22,000
Sept 19:
Debit 14% Notes Receivable $14,000
Credit Cash Account $14,000
c) Journal Entries to record collection of principal and interest at maturity:
Sept. 30, 2019:
Debit Cash Account $29,680
Credit Interest on Note $1,680
Credit Notes Receivable $28,000
March 31:
Debit Cash Account $23,650
Credit Interest on Note $1,650
Credit Notes Receivable $22,000
Dec. 18, 2018:
Debit Cash Account $14,490
Credit Interest on Note $490
Credit Notes Receivable $14,000
d) Adjusting Entry:
Dec. 31, 2018:
Debit Interest on Notes Receivable $2,150
Credit Interest on Notes $2,150
Explanation:
a) Note Date Principal Amount Interest Rate Term
(1) Oct. 1 $28,000 6% 1 year
(2) Jun. 30 22,000 10% 9 months
(3) Sep. 19 14,000 14% 90 days
b) Interest on the notes:
Total For 2018
1. 6% of $28,000 = $1,680 $1,680 x 4/12 = $560
2. 10% of $22,000 x 9/12 = $1,650 $1,650 x 6/9 = $1,100
3. 14% of $14,000 x 90/360 = $490 $490 x 90/90 = $490
Total $3,820 $2,150
c) Interests on notes receivable are prorated accordingly.
