Answer:
The Journal entries are as follows:
(a) On April 1, 2021
Notes receivable A/c Dr. $600,000
To Cash A/c $600,000
(To record loan given)
(b) On December 31, 2021
Interest receivable ($600,000 × 11% × 9/12) A/c Dr. $49,500
To Interest revenue $49,500
(To record accrued interest)
(c) On April 1, 2022
Cash A/c Dr. $666,000
To Notes receivable $600,000
To Interest receivable $49,500
To Interest revenue $16,500
(To record collection)
Notes:
Interest revenue on April 1, 2022:
= 11% of loan amount for 12 months - Accrued interest
= 0.11 × $600,000 - $49,500
= $66,000 - $49,500
= $16,500
