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May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer. 6 Received a $9,000, 10%, 120-day note from C. Gable, a customer. 11 Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively. The July bank statement indicated that the Leigh note had been paid. July 31 Aug. 10 Repaid the $10,000 borrowed on May 11. Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed. Received the amount due from Gable. 23

May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer. 6 Received a $9,000, 10%, 120-day note from C. Gable, a customer. 11 Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively. The July bank statement indicated that the Leigh note had been paid. July 31 Aug. 10 Repaid the $10,000 borrowed on May 11. Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed. Received the amount due from Gable. 23

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.6AP
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Question

Recording Note Transactions The following information is extracted from Tara
Corporation’s accounting records:

 

Required:
Prepare journal entries to record the preceding information, assuming that Tara
usually does not sell its notes. (Assume a 360-day year for the purposes of computing
interest and round all calculations to the nearest penny.)

May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer. 6 Received a $9,000, 10%, 120-day note from C. Gable, a customer. 11 Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively. The July bank statement indicated that the Leigh note had been paid. July 31 Aug. 10 Repaid the $10,000 borrowed on May 11. Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed. Received the amount due from Gable. 23
Transcribed Image Text:May 1 Received a $6,000, 12%, 90day note from V. Leigh, a customer. 6 Received a $9,000, 10%, 120-day note from C. Gable, a customer. 11 Sold the Leigh and Gable notes with recourse at the bank ot 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively. The July bank statement indicated that the Leigh note had been paid. July 31 Aug. 10 Repaid the $10,000 borrowed on May 11. Sept. 4 Received nofice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed. Received the amount due from Gable. 23
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