Answer:
Journal Entries:
Apr. 6 Debit 6% Notes receivable $2,700
Credit Accounts receivable $2,700
To record the receipt of a 120-day, 6% note for accounts receivable balance.
Apr. 26 Debit Cash $2,511
Debit Finance expense $189
Credit 6% Notes receivable $2,700
To record the discounted note at a rate of 7%.
May 3 Debit 7% Notes receivable $1,000
Credit Accounts receivable $1,000
To record the receipt of a 30-day, 7% note in payment for accounts receivable
June 2 Debit Accounts receivable $1,005.83
Credit 7% Notes receivable $1,000
Credit Interest revenue $5.83
To record the 30-day, 7% note is dishonored.
June 5 Debit Cash $1,005.83
Credit Accounts receivable $1,005.83
To record the receipt of cash and interest of 7% on the maturity value.
Explanation:
a) Data and Analysis:
Apr. 6 6% Notes receivable $2,700 Accounts receivable $2,700
Received a 120-day, 6% note
Apr. 26 Cash $2,511 Finance expense $189 6% Notes receivable $2,700 Discounted the note at a rate of 7%.
May 3 7% Notes receivable $1,000 Accounts receivable $1,000
Received a 30-day, 7% note in payment for accounts receivable
June 2 Accounts receivable $1,005.83 7% Notes receivable $1,000 Interest revenue $5.83 ($1,000 * 30/360) 30-day, 7% note is dishonored.
June 5 Cash $1,005.83 Accounts receivable $1,005.83
7% on the maturity value.
