Question

On April 1, 2021, Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker's business. The supplier explains that it has a temporary lack of funds that is slowing its production cycle. Shoemaker agrees to lend $510,000 to its supplier using a 12-month, 11% note.
Required:
Record the following transactions for Shoemaker Corporation.
1. The loan of $600,000 and acceptance of the note receivable on April 1, 2021.
2. The adjustment for accrued interest on December 31, 2021.
3. Cash collection of the note and interest on April 1, 2022.

Answer 1

Shoemaker Corporation Journal Entries

1. April 01, 2021

Dr Notes receivable 600,000

Cr Cash600,000

2. December 31,2021

Dr Interest receivable 42,075

Cr Interest revenue 42,075

3. April 01, 2019

Dr Cash 566,100

Cr Notes receivable 510,000

Cr Interest receivable 42,075

CrInterest revenue 14,025

Workings:

2.Interest revenue: $510,000 × 11% × 9/12 = $42,075

3.Interest revenue: $510,000 × 11% × 3/12 = $14,025

42,075+ 14,025=56,100

510,000+ 56,100= 566,100