Answer:
Esquire Company
1. Journal Entries
June 30, 2018:
Debit 9% Notes Receivable $48,000
Credit Sales Revenue $48,000
To record the sale of goods on account.
December 31, 2018:
Debit Interest Receivable $2,160
Credit Interest Revenue $2,160
To accrue interest revenue ($48,000 * 9% * 6/12).
March 31, 2019:
Debit Interest Receivable $1,080
Credit Interest Revenue $1,080
To accrue interest revenue ($48,000 * 9% * 3/12).
March 31, 2019:
Debit Cash $51,240
Credit Notes Receivable $48,000
Credit Interest Receivable $3,240
To record the collection of cash for goods and accruing interest.
2. If the December 31 adjusting entry for the interest accrual is not prepared, income before income taxes will be understated in 2018 and overstated in 2019 by $2,160.
Explanation:
a) Data and Analysis:
June 30, 2018: 9% Notes Receivable $48,000 Sales Revenue $48,000
December 31, 2018: Interest Receivable $2,160 Interest Revenue $2,160
March 31, 2019: Interest Receivable $1,080 Interest Revenue $1,080
March 31, 2019: Cash $51,240 Notes Receivable $48,000 Interest Receivable $3,240
