Answer:
note receivable 39,000 debit
sales revenue 39,000 credit
--Nov 1st to record sale of goods to Tung Decorators --
interest receivalbe 390 debit
interest revenue 390 credit
--Dec 31th adjusitng entry for accrued interest --
cash 40,170 debit
note receivable 39,000 credit
interest receivable 390 credit
interest revenue 780 credit
--May 1st collection of the note--
Explanation:
<u>First</u>, we record the sales revenue and we enter the promissory note at his nominal. Interest will be accrued as the time past.
<u>interest for the period Nov 1st - Dec 31th</u>
prncipal x rate x time
we must always have rate adn time in the same metric so we express the mont has fraction of year:
39,000 x 6% x 2/12 = 390
<u>collection of the note</u>
cash procceds: principal + interest
39,000 x (1 + 6% x 6/12) = 40,170
we write off both receivables, the note and the interest,
and we recognize interest revenue for the difference
40,170 - 39,000 - 390 = 780
