BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for receipt and dishonor of notes receivable

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, inducting 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

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.

To journalize: The entries, to record the transactions.

Explanation

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 RM42,560 
     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:

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 (1)

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 (2)

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

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain the separate entity concept.

College Accounting (Book Only): A Career Approach

Identify all items that are debited or credited to Social Security Tax Payable and to Medicare Tax Payable.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

How might a firms corporate WACC be affected by the size of its capital budget?

Fundamentals of Financial Management (MindTap Course List)

WACC AND OPTIMAL CAPITAL BUDGET Adams Corporation is considering four average-risk protects with the following ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)