BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

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

JOURNAL ENTRIES (NOTE RECEIVED, DISCOUNTED, DISHONORED, AND COLLECTED) Prepare general journal entries for the following transactions:

images

To determine

Prepare the journal entries to record the following transactions.

Explanation

Notes receivable:

Notes Receivable is a written promise to receive a certain amount on a future date, with certain percentage of interest. Companies use to issue notes receivable to meet short-term financing needs.

Prepare journal entry to record received 120-days, 7% note in payment for accounts receivable balance of $3,000.

DateAccount titles and ExplanationDebitCredit
August 4Notes receivable$4,000  
      Accounts receivable $4,000
 (To record received note to settle account)  

Table (1)

  • Notes receivable is a current asset, and it is increased. Therefore, debit notes receivable account for $4,000.
  • Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $4,000.

Prepare journal entry to record discounted the note at a rate of 8%.

DateAccount titles and ExplanationDebitCredit
August 14Cash$3,993.27  
 Interest expense (1)      $6.73  
       Notes receivable (2) $4,000
 (To record received payment of note with interest)  

Table (2)

Working notes:

(1)Calculate cash proceeds.

Cash proceeds =Maturity value Discount amount (Difference in time period)=($4,000+($4,000×7%×120360))($4,093.33×8%×110360)=$4,093.33$100.06=$3,993.27

(2)Calculate interest revenue.

Interest expense =Maturity valueCash proceeds= $4,093.33$3,993.27=$6.73

  • Cash is a current asset, and it is increased. Therefore, debit cash account for $3,993.27.
  • Notes receivable is a current asset, and it is decreased. Therefore, credit notes receivable account for $4,000.
  • Interest expense is a component of stockholders’ equity, and it increases the expemse accounts. Therefore, debit interest expense account for $6.73.

Prepare journal entry to record received a 30-day, 6% note in payment for accounts receivable balance of $900.

DateAccount titles and ExplanationDebitCredit
September 5Notes receivable$1,200  
      Accounts receivable $1,200
 (To record received note to settle account)  

Table (3)

  • Notes receivable is a current asset, and it is increased. Therefore, debit notes receivable account for $1,200.
  • Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $1,200.

Prepare journal entry to record 30 day, 7% note is dishonored.

DateAccount titles and ExplanationDebitCredit
October 5Accounts receivable$1,206  
      Notes receivable $1,200
       Interest revenue (3) $6
 (To record notes receivable dishonored)  

Table (4)

Working note:

(3)Calculate interest revenue

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

How can report writers ensure that they present their topics objectively and credibly?

Essentials of Business Communication (MindTap Course List)

How does an increase in productivity affect business?

Foundations of Business (MindTap Course List)

How would each of the following scenarios affect a firms cost of debt, rd( 1 T); its cost of equity, rs; and i...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)