Question

Hasty and Tasty Foodservice received a 120-day, 9% note for $12,000, dated April 9 from a customer on account. Assume 360 days in a year. a. Determine the due date of the note. b. Determine the maturity value of the note. $ c. Journalize the entry to record the receipt of the payment of the note at maturity. If an amount box does not require an entry, leave it blank. Aug. 7

Answer 1

Answer:

a.

August 7

b.

$12,360

c.

Dr. Cash                    $12,360

Cr. Interest Income  $360

Cr. Note receivable $12,000

Explanation:

Note Receivable is promise in writing to receive a sum of money in future. The money normally consists of Principal and interest.

In this question a note of $120,000 is received from the customer which will mature after 120 days and offer 9% interest on it.

Principal = $12,000

a.

Due date = April 9 + 120 days = August 7

b.

Maturity Value = Principal x ( ( 1 + interest rate ) x time period )

Maturity Value = $12,000 x  ( 1 + (9%  x 120/360 ) ) = $12,360

c.

Interest Income = $12,360 - $12,000 = $360