Explanation Note receivable: Note receivable refers to a written promise received by the creditor from the debtor in formal, for the amounts to be settled within a stipulated period of time. This written promise is issued by a debtor or borrower to the lender or creditor. Notes receivable is an asset of a business. Notes receivable often used for the credit periods of more than 60 days. Accounts receivable : Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts 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. Journalize the entries to record the transactions. Date Account Title and Explanation Debit ($) Credit ($) January 21 Accounts receivable – Company B 28,000 Sales 28,000 ( To record the sales made on account) January 21 Cost of merchandise sold 16,800 Merchandise inventory 16,800 (To record the cost of merchandise sold) March 18 Notes receivable 28,000 Accounts receivable – Company B 28,000 ( To record the receipt of note on account) May 17 Cash $28,280 Notes receivable $28,000 Interest revenue (1) $280 ( To record the collection of cash on note of march 18) June 15 Accounts receivable – Company P 17,700 Sales 17,700 ( To record the sales made on account) June 15 Cost of merchandise sold 10,600 Merchandise inventory 10,600 (To record the cost of merchandise sold) June 21 Notes receivable 18,000 Cash 18,000 ( To record the loaned amount on note) June 25 Cash 17,700 Accounts receivable – Company P 17,700 ( To record the collection of cash on account) July 21 Notes receivable 18,000 Cash 120 Notes receivable 18,000 Interest revenue (2) 120 ( To record the amount of interest received and renewal of the loan of June 21 ) September 19 Cash 18,270 Notes receivable 18,000 Interest revenue (3) 270 ( To record the collection of cash on note of July 21) September 22 Accounts receivable – Company W 20,000 Sales 20,000 ( To record the sales made on account) September 22 Cost of merchandise sold 12,000 Merchandise inventory 12,000 (To record the cost of merchandise sold) October 14 Notes receivable 20,000 Accounts receivable – Company W 20,000 ( To record the receipt of note on account) November 13 Accounts receivable – Company W $20,100 Notes receivable $20,000 Interest revenue (4) $100 ( To record dishonored note dated October 14) December 28 Cash $20,301 Accounts receivable – Company W $20,100 Interest revenue (5) $201 ( To record collection of cash from the dishonored note from Company W) Working note (1) : For May 17: Calculate the amount of interest revenue. Interest revenue= [ Face amount × Annual interest rate × Time in terms of year ] = [ $28,000 × 6 % 100 × 60 days 360 days ] = $ 280 Working note (2) : For July 21: Calculate the amount of interest revenue

15th Edition

ISBN: 9781337272124

Author: Carl Warren, James M. Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 9, Problem 6PB

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Chapter 9 Solutions

Financial Accounting

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Journalize the entries to record the transactions.

Solution Summary: The author explains that note receivable refers to a written promise received by the creditor from the debtor in formal.

Journalize the entries to record the transactions.

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Chapter 9 Solutions