Question

Splish Brothers Inc. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. (Omit cost of goods sold entries.) Nov. 1 Loaned $66,600 cash to C. Bohr on a 12-month, 6% note. Dec. 11 Sold goods to K. R. Pine, Inc., receiving a $7,200, 90-day, 6% note. Dec. 16 Received a $9,600, 180-day, 8% note to settle an open account from A. Murdock. Dec. 31 Accrued interest revenue on all notes receivable.Journalize the transactions.

Answer 1

Answer:

Nov 1st

note receivable debit 66,600

cash credit 66,600

Dec 11th

note receivable debit 7,200

sales revenue credit 7,200

Dec 16th

note receivable debit 9,600

account receivable credit 9,600

Dec 31th (adjusting entry)

interest receivable debit 714

interest revenue credit 714

Explanation:

(this calculation are done assuming 360 days year)

Nov 1st 66,600 6%  interest at Dec 31th  = 66,600 x 0.06 * (2/12) = $666

Dec 11th 7,200 90 days note 6% at Dec 31th = 7,200 x 0.06 x (20/360) = $24

Dec 16 9,600 6% 180 days   at Dec 31th  = 9,600 x 0.06 x (15/360) = $24

Total interest 666+24+24 = 714