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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

NOTES RECEIVABLE DISCOUNTING Marienau Suppliers had the following transactions:

images

REQUIRED

Record the transactions in a general journal.

To determine

Prepare a journal entry to record Suppliers M.

Explanation

Note receivable:

Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or, borrower to the lender or creditor. Notes receivable is an asset of a business.

DateAccount titles and ExplanationDebitCredit
March 1Accounts receivable -G.P$5,000
     Sales$5,000
(To record sale made on account)
March 20Notes receivable$5,000
     Accounts receivable - G.P$5,000
(To record received note to settle  account)
March 30Cash (1)$4,984.78
Interest expense (2)$15.22
     Notes receivable$5,000
(To record discount on notes receivable)
April 20Notes receivable$3,000
     Sales$3,000
(To record received note for merchandise sale)
May 5Cash (3)$3,003.49
     Notes receivable$3,000
      Interest revenue (4)$3.49
(To record received payment of note with interest)
June 19Accounts receivable - D. L$3,070
     Cash$3,070
(To record cash paid for dishonoured note)
July 31Cash$3,091.49
     Accounts receivable - D. L$3,070
      Interest revenue (5)$21.49
(To record Collected dishonoured note with interest)
August 1Accounts receivable - A.B$5,600
     Sales$5,600
(To record sale made on account)
August 12Cash$400
Notes receivable$5,200
     Accounts receivable - A.B$5,600
(To record cash received and note to settle account)
September 11Cash (6)$421.67
Notes receivable (new note)$4,800
     Notes receivable (old note)$5,200
      Interest revenue (7)$21.67
(To record received new note plus interest on old note)
September 26Cash$4,802.55
     Notes receivable$4,800
      Interest revenue $2.55
(To record received payment of note with interest)
November 10Accounts receivable - A.B$4,888
     Cash$4,888
(To record cash paid for dishonoured note)
December 15Cash$4,916.51
     Accounts receivable - A.B$4,888
     Interest revenue (8)$28.51
(To record Collected dishonoured note with interest)

Table (1)

Working notes:

(1) Calculate cash proceeds.

Cash proceeds =Maturity value Discount amount (Difference in time period)=($5,000+($5,000×6%×90360))($5,075×8%×80360)=$5,075$90.22=$4,984.78

(2) Calculate interest expense.

Interest expense =Notes payableCash proceeds= $5,000$4,984

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