NOTES RECEIVABLE DISCOUNTING Madison Graphics had the following notes receivable transactions:
REQUIRED
Record the transactions in a general journal.
Prepare a journal entry to record Suppliers MG.
Explanation of Solution
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.
Date | Account titles and Explanation | Debit | Credit |
May 1 | Accounts receivable -L.C | $5,600 | |
Sales | $5,600 | ||
(To record sale made on account) | |||
May 20 | Notes receivable | $5,600 | |
Accounts receivable - L.C | $5,600 | ||
(To record received note to settle account) | |||
May 30 | Cash (1) | $5,589.27 | |
Interest expense (2) | $10.73 | ||
Notes receivable | $5,600 | ||
(To record discount on notes receivable) | |||
June 20 | Notes receivable | $2,400 | |
Sales | $2,400 | ||
(To record received note for merchandise sale) | |||
July 25 | Cash (3) | $2,411.37 | |
Notes receivable | $2,400 | ||
Interest revenue (4) | $11.37 | ||
(To record received payment of note with interest) | |||
August 19 | Accounts receivable - P.A | $2,454 | |
Cash | $2,454 | ||
(To record cash paid for dishonoured note) | |||
August 31 | Cash | $2,458.91 | |
Accounts receivable - D. L | $2,454 | ||
Interest revenue (5) | $4.91 | ||
(To record Collected dishonoured note with interest) | |||
September 1 | Accounts receivable - B.F | $6,400 | |
Sales | $6,400 | ||
(To record sale made on account) | |||
September 12 | Cash | $400 | |
Notes receivable | $5,600 | ||
Accounts receivable - A.B | $6,000 | ||
(To record cash received and note to settle account) | |||
October 12 | Cash (6) | $432.50 | |
Notes receivable (new note) | $5,600 | ||
Notes receivable (old note) | $6,000 | ||
Interest revenue (7) | $32.50 | ||
(To record received new note plus interest on old note) | |||
October 26 | Cash | $5,607.42 | |
Notes receivable | $5,600 | ||
Interest revenue | $7.42 | ||
(To record received payment of note with interest) | |||
December 11 | Accounts receivable – B.F | $5,695.33 | |
Cash | $5,695.33 | ||
(To record cash paid for dishonoured note) | |||
December 27 | Cash | $5,713.05 | |
Accounts receivable - A.B | $5,695.33 | ||
Interest revenue (8) | $17.72 | ||
(To record Collected dishonoured note with interest) |
Table (1)
Working notes:
(1)Calculate cash proceeds.
(2)Calculate interest expense.
(3)Calculate cash proceeds.
(4)Calculate interest revenue.
(5)Calculate interest revenue.
(6)Calculate interest revenue.
(6)Calculate cash proceeds.
(7)Calculate interest revenue.
(8)Calculate interest revenue.
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