Question

On June 30, 2021, the Esquire Company sold some merchandise to a customer for $30,000. In payment, Esquire agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2022. The 6% rate is appropriate in this situation.Required:1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2019 collection.

Answer 1

Answer:

1.  Journal entries to record the sale of merchandise:

Debit Accounts Receivable $30,000

Credit Sales revenue $30,000

Journal entries to record the interest accrual at December 31, 2021:

Debit Interest receivable $900

Credit Interest revenue $900

At March 31, 2022, journal entries to record the collection:

Debit Cash $31,350

Credit Accounts Receivable $30,000

Credit Interest receivable $900

Credit Interest revenue $450

Explanation:

1.  Journal entries to record the sale of merchandise:

Debit Accounts Receivable $30,000

Credit Sales revenue $30,000

Esquire agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2022.

The amount of the interest per year = 6% x $30,000 = $1,800

The amount of the interest per month = $1,800/12 = $150

At December 31, 2021, the interest accrual = $150 x 6 = $900

Journal entries to record the interest accrual:

Debit Interest receivable $900

Credit Interest revenue $900

At March 31, 2022, journal entries to record the collection:

Debit Cash $31,350

Credit Accounts Receivable $30,000

Credit Interest receivable $900

Credit Interest revenue $450