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3 years ago

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Kelly Realty loaned money and received the following notes during 2018:Note Date Principal Amount Interest Rate Term(1) Oct. 1 $

28,000 6% 1 year(2) Jun. 30 22,000 10% 9 months(3) Sep. 19 14,000 14% 90 daysRequired:1. Determine the maturity date and maturity value of each note.2. Journalize the entries to establish each note Receivable and to record collection of principle and interest at maturity.Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note.Explanations are not required.(Round to the nearest dollar)

1 answer:

hammer [34]3 years ago

8 0

Answer:

Kelly Realty

1. Determination of Maturity Date and Value for each note:

Note Principal Interest Rate Maturity Date Maturity Value

1. $28,000 6% Sept. 30 2019 $29,680

2. $22,000 10% March 31, 2019 $23,650

3. $14,000 14% Dec. 18, 2018 $14,490

b) Journal Entries to record receivables:

October 1:

Debit 6% Notes Receivable $28,000

Credit Cash Account $28,000

June 30:

Debit 10% Notes Receivable $22,000

Credit Cash Account $22,000

Sept 19:

Debit 14% Notes Receivable $14,000

Credit Cash Account $14,000

c) Journal Entries to record collection of principal and interest at maturity:

Sept. 30, 2019:

Debit Cash Account $29,680

Credit Interest on Note $1,680

Credit Notes Receivable $28,000

March 31:

Debit Cash Account $23,650

Credit Interest on Note $1,650

Credit Notes Receivable $22,000

Dec. 18, 2018:

Debit Cash Account $14,490

Credit Interest on Note $490

Credit Notes Receivable $14,000

d) Adjusting Entry:

Dec. 31, 2018:

Debit Interest on Notes Receivable $2,150

Credit Interest on Notes $2,150

Explanation:

a) Note Date Principal Amount Interest Rate Term

(1) Oct. 1 $28,000 6% 1 year

(2) Jun. 30 22,000 10% 9 months

(3) Sep. 19 14,000 14% 90 days

b) Interest on the notes:

Total For 2018

1. 6% of $28,000 = $1,680 $1,680 x 4/12 = $560

2. 10% of $22,000 x 9/12 = $1,650 $1,650 x 6/9 = $1,100

3. 14% of $14,000 x 90/360 = $490 $490 x 90/90 = $490

Total $3,820 $2,150

c) Interests on notes receivable are prorated accordingly.

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