1.
To record: The acceptance of the note on December 1, 2015.
1.
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.
Date | Account Title and Explanation | Debit($) | Credit($) | |
December 1, 2015. | Notes receivable (1) | 90,000 | ||
Service revenue | 90,000 | |||
(To record the services provided and acceptance of note) |
Table (1)
Description:
- Notes receivable is an asset and increased it. So, debit notes
receivable account . - Service revenue is a component of stock holders’ equity and increased it. So credit service revenue account.
2.
To record: The interest collected on December 1, for 2016 and 2017 and the adjustment for interest revenue on December 31, 2015, 2016 and 2017.
2.
Explanation of Solution
Interest receivables:
Interest receivables, are non-trade receivables as these are not resulted from sales transaction or business operations.
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.
Journal entry for adjustment of interest receivable:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 31, 2015 | Interest receivable (1) | 750 | ||
Interest revenue | 750 | |||
(To record adjustment for accrued interest) |
Table (2)
Journal entry for receipt of annual interest:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 1, 2016 | Cash | 9,000 | ||
2015 | Interest receivable (1) | 750 | ||
Interest revenue (2) | 8,250 | |||
(To record receipt of annual interest) |
Table (3)
Journal entry for adjustment for accrues interest:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 31, 2016 | Interest receivable (1) | 750 | ||
Interest revenue | 750 | |||
(To record adjustment for accrued interest) |
Table (4)
Journal entry for receipt of annual interest:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 1, 2017 | Cash | 9,000 | ||
2016 | Interest receivable (1) | 750 | ||
Interest revenue (2) | 8,250 | |||
(To record receipt of annual interest) |
Table (5)
Journal entry for adjustment for accrues interest:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 31, 2017 | Interest receivable (1) (2016) | 750 | ||
Interest revenue | 750 | |||
(To record adjustment for accrued interest) |
Table (6)
Description:
For Adjustment of interest receivable on December 31, 2015:
- Interest receivable is an asset and it increases. Hence debit the interest receivable
- Interest revenue is a component of stock holders’ equity and increased it. Hence credit the interest revenue.
Working notes:
For receiving of annual interest on December 1, 2016:
- Cash is an asset and it increases. Hence debit the cash account.
- Interest receivable is an asset and it decreases. Hence credit the interest receivable account.
- Interest revenue is a component of
stockholders’ equity and it increases. Hence credit the interest revenue account.
Working notes:
For adjustment of interest receivable on December 31, 2016:
- Interest receivable is an asset and it increases. Hence debit the interest receivable
- Interest revenue is a component of stock holders’ equity and increased it. Hence credit the interest revenue.
Working notes:
For receiving of annual interest on December 1, 2017:
- Cash is an asset and it increases. Hence debit the cash account.
- Interest receivable is an asset and it decreases. Hence credit the interest receivable account.
- Interest revenue is a component of stockholders’ equity and it increases. Hence credit the interest revenue account.
Working notes:
For adjustment of interest receivable on December 31, 2017:
- Interest receivable is an asset and it increases. Hence debit the interest receivable
- Interest revenue is a component of stock holders’ equity and increased it. Hence credit the interest revenue.
Working notes:
3.
To record: Cash collection on December 1, 2018:
3.
Explanation of Solution
Journal entry for cash collection on December 1, 2018:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
December 1, 2018 | Cash | 99,000 | ||
Notes receivable | 90,000 | |||
2017 | Interest receivable (1) | 750 | ||
Interest revenue (2) | 8,250 | |||
(To record cash collection of the note and interest) |
Table (7)
Description:
For receiving of annual interest on December 1, 2018:
- Cash is an asset and it increases. Hence debit the cash account.
- Notes receivable is an asset and it decreases. Hence credit the notes receivable account.
- Interest receivable is an asset and it decreases. Hence credit the interest receivable account.
- Interest revenue is a component of stockholders’ equity and it increases. Hence credit the interest revenue account.
Want to see more full solutions like this?
Chapter 5 Solutions
Financial accounting
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education