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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Notes Receivable

Link Communications programs voicemail systems for businesses. For a recent project, they charged $135 000. The customer secured this amount by signing a note bearing 9% interest on February 1, 2019.

Required:

1. Prepare the journal entry to record the sale on February 1, 2019.

2. Determine how much interest Link will receive if the note is repaid on December 1, 2019.

3. Prepare Link’s journal entry to record the cash received to pay off the note and interest on December 1, 2019.

To determine

(a)

Notes Receivables:

The note receivables are a type of promissory note which is made for the payment of a specified amount at an extended date. These notes can be interest charging or cannot be charging the interest.

To calculate:

The journal entry for recording sales on February 1,2019.

Explanation

The Link Communications charges fees of $1,35,000 for a project from a local business and that business gives a note of 9%. This is given in the question.

The journal entry for recording sales for the Link Communications is as follows:

Date Particulars Debit ($) Credit ($)
Feb
To determine

(b)

Notes Receivables:

The note receivables are a type of promissory note which is made for the payment of a specified amount at an extended date. These notes can be interest charging or cannot be charging the interest.

To calculate:

The interest amount to be received on December 1,2019.

To determine

(c)

Notes Receivables:

The note receivables are a type of promissory note which is made for the payment of a specified amount at an extended date. These notes can be interest charging or cannot be charging the interest.

The necessary journal entry for recording the cash received on December 1,2019.

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