Journalize the following transactions in the accounts of Safari Games Co., which operates a riverboat casino: Apr. 18. Received a $60,000, 30-day, 7% note dated April 18 from Glenn Cross on account. 30. Received a $42,000, 60-day, 8% note dated April 30 from Rhoni Melville on account. May 18. The note dated April 18 from Glenn Cross is dishonored, and the customer’s account is charged for the note, including interest. June 29. The note dated April 30 from Rhoni Melville is dishonored, and the customer’s account is charged for the note, including interest. Aug. 16. Cash is received for the amount due on the dishonored note dated April 18 plus interest for 90 days at 8% on the total amount debited to Glenn Cross on May 18. Oct. 22. Wrote off against the allowance account the amount charged to Rhoni Melville on June 29 for the dishonored note dated April 30.

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Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

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BuyFind

Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

Solutions

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Answer 3

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Answer 4

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Answer 5

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 dishonored note.

Journalize the entries to record the transactions.

Date	Account Title and Explanation	Debit ($)	Credit ($)
April 18	Notes receivable	60,000
	Accounts receivable – G Cross		60,000
	(To record the note received on account)

April 30	Notes receivable	42,000
	Accounts receivable – Person RM		42,000
	(To record the note received on account)

June 29	Accounts receivable – G Cross	60,350
	Notes receivable		60,000
	Interest revenue (1)		350
	(To record note dishonored)

June 29	Accounts receivable – Person RM	42,560
	Notes receivable		42,000
	Interest revenue (2)		560
	(To record note dishonored)

August 16	Cash	61,557
	Accounts receivable – G Cross		60,350
	Interest revenue (3)		1,207
	(To record the collection of cash on account along with 8% interest)


October 22	Allowance for doubtful accounts	42,560
	Accounts receivable – Person RM		42,560
	(To write off the receivables from Person RM)

Table (1)

Working note (1):

Calculate the amount of interest revenue accrued from G Cross’s 30 days note.

Interest revenue accruedfrom G Cross’s 30 days note} = [Notes Receivable×Interest rate×Time in terms of one year]= $60,000×7%×30 days360 days=$350

Working note (2):

Calculate the amount of interest revenue accrued from Person RM’s 60 days note.

Interest revenue accruedfrom Person RM's 60 days note} = [Notes Receivable×Interest rate×Time in terms of one year]= $42,000×8%×60 days360 days=$560

Working note (3):

Calculate the amount of interest revenue earned on account of G Cross for the period, from May 18 to August 16

Financial Accounting

Solutions

Financial Accounting

Explanation of Solution

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Chapter 9 Solutions

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Apr. 18.	Received a $60,000, 30-day, 7% note dated April 18 from Glenn Cross on account.
30.	Received a $42,000, 60-day, 8% note dated April 30 from Rhoni Melville on account.
May 18.	The note dated April 18 from Glenn Cross is dishonored, and the customer’s account is charged for the note, including interest.
June 29.	The note dated April 30 from Rhoni Melville is dishonored, and the customer’s account is charged for the note, including interest.
Aug. 16.	Cash is received for the amount due on the dishonored note dated April 18 plus interest for 90 days at 8% on the total amount debited to Glenn Cross on May 18.
Oct. 22.	Wrote off against the allowance account the amount charged to Rhoni Melville on June 29 for the dishonored note dated April 30.