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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

Yarnell Electronics sells computer systems to small businesses. Yarnell engaged in the following activities involving notes receivable:

a. On September 1, 2019, Yarnell sold a $10,000 system to Ross Company. Ross gave Yarnell a 6-month, 7% note as payment.

b. On December 1, 2019, Yarnell sold a $6,000 system to Searfoss Inc. Searfoss gave Yarnell a 9-month, 9% note as payment.

c. On March 1, 2020, Ross paid the amount due on its note.

d. On September 1, 2020, Searfoss paid the amount due on its note.

Required:

Prepare the necessary journal and adjusting entries for Yarnell Electronics to record these transactions.

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.

Journal Entries:

Journal entries are a way to record and summarize the transactions occurred in the business for the presentation and better understanding. Every journal entry has a dual effect i.e. Debit and Credit.

To calculate:

The journal and adjusting entries for recording sales for the year 2019 and 2020.

Explanation

The journal entries for recording sales for the Yarnell Electronics are as follows:

Date Particulars Debit ($) Credit ($)
(a) Sept.    1,2019 7% Notes Receivables…………………… Sales revenue………………….….…… (Record the sales against the notes receivable for Ross Company) 10,000 10,000
(b) Dec.    1,2019 9% Notes Receivables…………………… Sales revenue………………….….…… (Record the sales against the notes receivable for Searfoss Inc.) 6,000 6,000
(c) Dec.    31,2019 Interest Receivables….…………………… Interest Income……………….….……(Record the sales against the notes receivable for    4 months in Ross Company and    1 month in Searfoss Inc.) 278 278
(d) March    1,2020 Cash…………………

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