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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Recording Note Transactions The following information is extracted from Tara Corporation’s accounting records:

Chapter 6, Problem 12P, Recording Note Transactions The following information is extracted from Tara Corporations accounting

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.)

To determine

Prepare journal entry to record the given transactions by assuming that Company T usually does not sell its notes.

Explanation

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Prepare journal entry to record the given transactions by assuming that Company T usually does not sell its notes.

DateAccount Titles and explanationDebit ($)Credit ($)
May 1Notes receivable 6,000 
      Accounts receivable 6,000
 (To record the notes received from the Customer L )  

Table (1)

DateAccount Titles and explanationDebit ($)Credit ($)
May 6Notes receivable 9,000 
      Accounts receivable 9,000
 (To record the notes received from the Customer G )  

Table (2)

DateAccount Title and ExplanationDebitCredit
May  11Cash [$6,001.47(8)+$8,913.79(8)+$9,700(7)] 24,615.26 
 Discount on notes payable (7)300.00 
 Loss on sale of receivables [$102.53+$208.71] 311.24 
      Note receivable 15,000.00
      Notes payable 10,000.00
      Interest income [$20(8)+$12.50(8)]  32.50
      Recourse liability  194.00
 (To record the loss on sale of receivables with recourse liability)  

Table (3)

DateAccount Titles and explanationDebit ($)Credit ($)
July 31Recourse liability 84.00 
      Gain from sale of notes 84.00
 (To record the note that is not been paid)  

Table (4)

DateAccount Titles and explanationDebit ($)Credit ($)
August 10Notes payable10,000.00 
      Cash 10,000.00
 (To record the interest collected on transfer of  accounts receivable)  

Table (5)

DateAccount Titles and explanationDebit ($)Credit ($)
August 10Interest expense300.00 
     Discount on notes payable  300.00
 (To record the interest paid)  

Table (6)

DateAccount Titles and explanationDebit ($)Credit ($)
September  4Recourse liability 84.00 
 Notes  receivable dishonored 84.00
      Cash [$9,000+$300+$10]   
 (To record the payment of amount that have been dishonored by the bank)  

Table (7)

DateAccount Titles and explanationDebit ($)Credit ($)
September  23Cash ($9,310+$56.89) 84.00 
      Interest income ($9,310×11%×20360)  84

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