Answer:
March 1: Note acceptance
Debit Note receivable $9,100
Credit Accounts receivable $9,100
<em>(To record note receivable from Company B)</em>
Sept 1: Cash collection
Debit Cash $9,100
Credit Note receivable $9,100
<em>(To record cash collection of note receivable)</em>
Debit Cash $364
Credit Interest receivable $364
<em>(To record cash collection of interest receivable on note)</em>
Explanation:
Note is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest revenue on the note is calculated as: Principal x Interest Rate x Time
The total interest revenue is $9,100 x 8%/12 x 6 months = $364.
Monthly interest revenue is therefore $364 / 6 months = $60.67.
<em>The 6 months is from March 1 to Sept. 1.</em>
On a monthly basis, Company A would accrue for the interest revenue as follows:
Debit Interest receivable $60.67
Credit Interest revenue $60.67
<em>(Interest accrual on notes receivable)</em>
