Chapter 4, Problem 4.15E

Exercise 4.15

LO 6 . 7

Notes receivable-interest accrual and collection On April 1, 2016, Tabor Co. received an $18,000 note from a customer in settlement of an $18,000 account receivable from that customer. The note bore interest at the rate of 15% per annum, and the note plus interest was payable March 31, 2017.

Required:

Use the horizontal model to show the effects of each of these transactions and adjustments:

1. Receipt of the note on April 1, 2016.
2. The accrual of interest at December 31, 2016.
3. The collection of the note and interest on March 31, 2017.

(Note: As an alternative to using the horizontal model, write the journal entries to show each of these transactions and adjustments.)