Concept explainers
a-1.
Journalize the receipt of note on August 1, 2015.
a-1.

Explanation of Solution
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Journalize the receipt of note on August 1, 2015.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2015 | ||||||
August | 1 | Notes Receivable | 36,000 | |||
36,000 | ||||||
(Record note receivable received in settlement of account receivable) |
Table (1)
Description:
- Notes Receivable is an asset account. The amount to be received increased, and an increase in asset is debited.
- Accounts Receivable is an asset account. Since accounts receivable is settled by receipt of note, amount to be received decreased, and a decrease in asset is credited.
2.
Journalize the
2.

Explanation of Solution
Journalize the adjustment entry of accrued interest revenue on December 31, 2015.
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2015 | ||||||
December | 31 | Interest Receivable | 1,350 | |||
Interest Revenue | 1,350 | |||||
(Record accrued interest on note) |
Table (2)
Description:
- Interest Receivable is an asset account. Since interest to be received has increased, asset value increased, and an increase in asset is debited.
- Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.
Working Notes:
Compute amount of interest accrued on December 31, 2015.
3.
Journalize the collection of principal and interest on the note on January 31, 2016.
3.

Explanation of Solution
Journalize the collection of principal and interest on the note on January 31, 2016.
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2016 | ||||||
January | 31 | Cash | 37,620 | |||
Notes Receivable | 36,000 | |||||
Interest Receivable | 1,350 | |||||
Interest Revenue | 270 | |||||
(Record principal and interest collected on note) |
Table (3)
Description:
- Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
- Notes Receivable is an asset account. Since the note receivable is received, asset account decreased, and a decrease in asset is credited.
- Interest Receivable is an asset account. Since interest to be received is received, asset value decreased, and a decrease in asset is credited.
- Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.
Working Notes:
Compute amount of interest revenue on January 31, 2016.
b.
Journalize the transaction of the note being defaulted on January 31, 2016.
b.

Explanation of Solution
Journalize the transaction of the note being defaulted on January 31, 2016.
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2016 | ||||||
January | 31 | Accounts Receivable | 37,620 | |||
Notes Receivable | 36,000 | |||||
Interest Receivable | 1,350 | |||||
Interest Revenue | 270 | |||||
(Record the note being defaulted) |
Table (4)
Description:
- Accounts Receivable is an asset account. Since amount to be received has increased, asset account increased, and an increase in asset is debited.
- Notes Receivable is an asset account. Since the note receivable is received, asset account decreased, and a decrease in asset is credited.
- Interest Receivable is an asset account. Since interest to be received is received, asset value decreased, and a decrease in asset is credited.
- Interest Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited.
b.
Indicate the effects of the transactions (1) to (4) in Part (a) on the given financial statement elements, as I (increase), or D (decrease), or NE (no effect).
b.

Explanation of Solution
Indicate the effects of the transactions (1) to (4) in Part (a) on the given financial statement elements, as I (increase), or D (decrease), or NE (no effect).
Table (5)
Want to see more full solutions like this?
Chapter 7 Solutions
Financial & Managerial Accounting With Connect Plus Access Code: The Basis For Business Decisions
- How much should be recorded as goodwill??arrow_forwardNot use ai solution please and accounting questionarrow_forwardOn January 1, 2025, Fisher Company makes the two following acquisitions. 1. 2. Purchases land having a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,468. Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (Interest payable annually on January 1). The company has to pay 8% interest for funds from its bank. (a) (b) Record the two journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2025. Record the interest at the end of the first year on both notes using the effective-interest method. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal place, e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries…arrow_forward
- Question Accounting-Cash conversion cycle: Pem Corp. has an inventory period of 22.6 days, an accounts payable period of 37.7 days, and an accounts receivable period of 31.9 days. What is the company's cash cycle? Need answerarrow_forwardQuick answer of this accountingarrow_forwardAccounting problemarrow_forward
- 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





