Question

Valley Designs issued a 90-day, 6% note for $96,000, dated April 22, to Bork Furniture Company on account. Assume 360 days in a year when computing the interest. a. Determine the due date of the note. July 9 b. Determine the maturity value of the note. $ Feedback The due date is the date the note is to be paid. Remember the interest rate is stated on an annual basis, while the term is expressed as days. Assume a 360 day year. The maturity value is the amount that must be paid at the due date of the note. c1. Journalize the entry to record the receipt of the note by Bork Furniture. If an amount box does not require an entry, leave it blank. Accounts Receivable-Valley Designs Allowance for Doubtful Accounts Feedback The account receivable must be removed from the books and the newly issued note receivable recorded. c2. Journalize the entry to record the receipt of payment of the note at maturity. If an amount box does not require an entry, leave it blank.

Answer 1

Answer: Please see answer in explanation column

Explanation:

a) Due date = April 22+90 days =  July  21

b) Maturity value = 96,000+(96,000*6%*90/360) = $97,440

c1) Journal entry  for receipt of note by Bork Furniture

           journal       Debit                          Credit

Notes receivable       $96,000  

Account receivable                                        $96,000

C2) Journal entry  to record receipt of payment at maturity

 journal                     Debit                             Credit

Cash                        $97,440  

Notes receivable                                            $96,000

Interest revenue                                       $1,440 (97,440-96,000)