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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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Accounting for Notes Receivable

On November 30, 2019, Tucker Products performed computer programming services for Thomas Inc. in exchange for a 5-month, $125,000, 9% note receivable. Thomas paid Tucker the full amount of interest and principal on April 30, 2020.

Required:

Prepare the necessary entries for Tucker to record the transactions described above.

To determine

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 entries for recording sales through note receivables on February 30,2019 for 5 months.

Explanation

The Tucker Products charges fees of $1,25,000 for a computer programming from a Thomas Inc. and that business gives a note of 9% for 5 months on November 30,2019. The payment of principal and interest is made on April 30,2020. This is given in the question.

The journal entries for recording sales for the Tucker Products are as follows:

Date Particulars Debit ($) Credit ($)
Nov. 30,2019 Notes Receivables Sales revenue (Record the sales against the notes receivable) 1,25,000 1,25,000
Dec. 31,2019 Interest Receivable ($1,25,000×9%×112) Interest Income (Record the interest accrued at the year end on note receivable for one month ) 937

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