Question

Riley Company received a notice with its bank statement that the bank had collected a note receivable for $5,000 plus $150 of interest. The bank had credited these amounts to Riley 's account less a collection fee of $10. Riley Company had already accrued the interest for this note on its books.
(a)How will these items affect Riley Company's bank reconciliation?

(b)Prepare the journal entry that Riley Company will make to record this information on its books.

Answer 1

Answer:

The affect of the given items and the journal entry is shown below:

Explanation:

a. The effect of given items should be adjusted in company bank reconciliation is as follows

1. The amount of note and the interest is added

2. And, the collection fee is deducted

b. The journal entry is as follows

Cash $5,140

Miscellaneous expense $10

                    To Notes receivable $5,000

                    To Interest receivable $150

(Being the collection is recorded)