Question

Uniform Supply accepted a $5,200, 90-day, 12% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (

Answer 1

Answer:

The journal entry is shown below:

Explanation:

The journal entry is as follows

On January 15

Accounts receivable   $5,356

      To Note receivable     $5,200

       To Interest revenue    $26

       To Interest receivable    $130

(Being cash received in respect of note receivable, interest accrual is recorded)

The computation of interest receivable is shown below:

= Principal × rate of interest × number of days ÷ (total number of days in a year)  

= $5,200 × 12% × (75 days ÷ 360 days)

= $130

The 75 days is counted from October 17 to December 31

And, the total amount is

= Principal × rate of interest × number of days ÷ (total number of days in a year)  

= $5,200 × 12% × (90 days ÷ 360 days)

= $156