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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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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 9, Problem 24E
Textbook Problem
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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.

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.

DateAccount Title and ExplanationDebit ($)Credit ($)
April 18Notes receivable60,000 
        Accounts receivable – G Cross 60,000
 (To record the note received on account)  
    
April 30Notes receivable42,000 
        Accounts receivable – Person RM 42,000
 (To record the note received on account)  
    
June 29Accounts receivable – G Cross60,350 
     Notes receivable 60,000
     Interest revenue (1) 350
 (To record note dishonored)  
    
June 29Accounts receivable – Person RM    42,560 
     Notes receivable 42,000
     Interest revenue (2) 560
 (To record note dishonored)  
    
August 16Cash 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 22Allowance for doubtful accounts42,560 
     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

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Chapter 9 Solutions

Financial Accounting
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