Question

Pina Colada Corp. holds Tamarisk, Inc. $44400, 120-day, 15% note. The entry made by Pina Colada Corp. when the note is collected, assuming no interest has previously been accrued is: (Use 360 days for calculation.)

Answer 1

Answer and Explanation:

The journal entry is shown below

Cash  $46,620

     To Notes Receivable $44,400

     To Interest receivable ($44,400 × 15% × 120 days ÷  360 days)

(Being the cash received is recorded)

Here we debited the cash as it increased the assets and at the same time we credited the interest receivable and the note receivable as it decreased the assets

The same is to be considered