Question

On December 1, Daw Co. accepts a $10,000, 45-day, 6% note from a customer. (1) Prepare the year-end adjusting entry to record accrued interest revenue on December 31. (2) Prepare the entry required on the note's maturity date assuming it is honored. (Use 360 days a year.)

Answer 1

Answer:Please find answers in explanation column

Explanation:

Accrued interest revenue on December 31=

Principal x Time X Rate

$10,000 X 6%x 30/360(Dec1st - 31st)

$50

Accrued interest revenue on Maturity date=

Principal x Time X Rate

$10,000 X 6%x 45/360

=$75

Journal to record Interest revenue accrued at the end of year.

Date Account Title Debit Credit

Dec31Interest Receivables $50Dr

Interest Revenue$50Cr

Journal to Record the receipt of note with interest

15th Jan Cash $10,075 Dr

Interest Recivable $50 Cr

Interest Revenue $25 Cr

Note Receivables $10,000 Cr