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Journalize the following transactions of Trapper Jon’s Productions: June 23. Received a $48,000, 90-day, 8% note dated June 23 from Radon Express Co. on account. Sept. 21. The note is dishonored by Radon Express Co. Oct. 21. Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Radon Express Co. on September 21.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 9, Problem 23E
Textbook Problem
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Journalize the following transactions of Trapper Jon’s Productions:

June 23. Received a $48,000, 90-day, 8% note dated June 23 from Radon Express Co. on account.
Sept. 21. The note is dishonored by Radon Express Co.
Oct. 21. Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Radon Express Co. on September 21.

To determine

Journalize the entries, to record the transactions.

Explanation of Solution

Note receivable: Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or borrower to lender or creditor. Notes receivable is an asset of a business.

Interest on note: Interest on note is the amount charged on the principal value of note for the privilege of borrowing money. Interest is to be paid by the borrower and to be received by the lender.

Dishonored note: Note receivable refers to a written promise by the debtor for the amounts to be received within a stipulated period of time. Note is otherwise known as promissory note. If this promissory note is not settled by the debtor at its maturity date, then it became is known as dishonored note.

Journalize the entries to record the transactions.

DateAccount Title and ExplanationDebit ($)Credit ($)
June 23Notes receivable48,000 
       Accounts receivable – Company RE 48,000
 (To record the receipt of note on account)  
 
December 31 Accounts receivable – Company RE48,960 
    Notes receivable 48,000
    Interest revenue (1) 960
 (To record note dishonored)  
 
October 21Cash 49,368 
    Accounts receivable  48,960
     Interest revenue (2) 408
 (To record the collection of cash on account along with 10% interest)  

Table (1)

Working note (1):

Calculate the amount of interest revenue accrued till September 21.

Interest revenue accruedtill September 21} = [Notes Receivable×Interest rate×Time in terms of one year]= $48,000×8%×90 days360 days=$960

Working note (2):

Calculate the amount of interest revenue earned for the period from September 22 to October 21

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Chapter 9 Solutions

Financial Accounting
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