Question

Elizabeth Proctor sells equipment for $80 000 to Matthew Gamble on 1 July 2013 in exchange for note bearing 12 per cent interest. Prepare a journal entry to record the accrued interest on 30 June 2014, and the repayment on 30 September 2014.

Answer 1

Answer:

Following would be the journal entries in the books of Elizabeth Procter,

On July 1, 2013.

Notes Receivable A/C                                     Dr.  $80,000

    To Equipment A/C                                                               $80,000

(Being equipment sold against notes receivable being recorded)

On June 30, 2014

Notes Receivable A/C                                           Dr. 9600

    To Interest Revenue A/C                                                    9600

(Being accrued interest on notes receivable recorded)

On Sept 2014,

Cash  A/C                                                          Dr. 92,000  

   To Notes Receivable A/C                                                    $80,000

   To Interest Receivable A/C                                                  $9600

   To Interest Revenue    A/C                                                   $2400

(Being notes receivable and interest received receipt being recorded)

Interest Revenue refers to the income which has been earned as on a date.

Interest Receivable refers to the income which has not been received and which has been outstanding.