Answer:
20Y3
Nov. 21 :
Debit Notes receivable $66,000
Credit Accounts receivable $66,000
<em>(To recognize notes receivable iro past due account)</em>
Dec. 31:
Debit Interest revenue $161.33
Credit Interest receivable $161.33
<em>(To record accrued interest on notes receivable)</em>
Jan. 20:
Debit Cash $66,880
Credit Notes receivable $66,000
Credit Interest receivable $880
<em>(To record payment of note and interest on Nov. 21 notes)</em>
Explanation:
Note receivable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest revenue on the notes is calculated as: Principal x Interest Rate x Time
In this case, the total interest expense is $66,000 x 8%/12 x 2 months = $880.
Total interest expense to the Company as at December 31 is therefore $880 / 60 days x 11 days = $161.33.
