Explanation Note Receivable: Note receivable is a written promise to pay on a specific future date a specific amount of money to the bearer. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. a. Receipt of Notes Receivables: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 1/May/2014 Notes receivables 4,850,000 Sales 4,850,000 (to record sales revenue) Table (1) Since notes receivable is an asset, asset is increased. Hence, notes receivables account is debited. Since a sale is an income, income is increased. Hence, sales account is credited. b. Recognition of income at year end: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 31/Dec/2014 Interest receivable 258,667 Interest 258,667 (to recognize interest revenue) Table (2) Since interest receivable is an asset, asset is increased. Hence, interest receivable account is debited. Since interest received is an income, income is increased. Hence, interest account is credited. c. Receipt of payment against Notes Receivables: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 1/Mar/2015 Cash 5,173,334 Interest 64,667 Interest receivable 258,667 Notes receivables 4,850,000 (to record sales revenue) Table (3) Since cash is an asset, asset is increased. Hence, cash account is debited. Since interest received is an income, income is increased. Hence, interest account is credited. Since interest receivable is an asset, asset is decreased. Hence, interest receivable account is credited. Since notes receivable is an asset, asset is decreased. Hence, notes receivable account is credited. Working Notes: Calculation of interest revenue to be recognized at year end is as follows: Interest = Notes payable × Interest percentage × Expired period = $ 4 , 850 , 000 × 8 % × 8 12 = $ 258 , 667 Calculation of interest for subsequent year at the time of maturity is as follows: Interest = Notes payable × Interest percentage × Period in the year of settlement = $ 4 , 850 , 000 × 8 % × 2 12 = $ 64 , 667 d. Recognition of income at the time of sale of notes receivables: Date Account Title and Explanation Post Ref

Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition

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ISBN: 9780134047430

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 9, Problem 9.16E

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Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition

Ch. 9 - Prob. 9.1Q Ch. 9 - Do companies always classify cash as a current...Ch. 9 - Prob. 9.3Q Ch. 9 - Do accountants typically measure accounts...Ch. 9 - Under the allowance method, will the actual...Ch. 9 - How does an entity record a subsequent recovery of...Ch. 9 - Does the aging of accounts receivable method of...Ch. 9 - Prob. 9.8Q Ch. 9 - What is the difference between pledging accounts...Ch. 9 - How do companies account for receivables that are...

Ch. 9 - Is the face value of a note receivable exchanged...Ch. 9 - What do firms use to record the sales value of a...Ch. 9 - Explain why a company must have highly effective...Ch. 9 - The following are held by YRT Corporation at...Ch. 9 - Fernandez Company had an accounts receivable...Ch. 9 - On its December 31, Year 2, balance sheet, Red...Ch. 9 - Stanberry Company sold 500,000 of net accounts...Ch. 9 - On November 30, Year 1, Derin Corporation agreed...Ch. 9 - Which of the following disclosures about accounts...Ch. 9 - Prob. 9.1BE Ch. 9 - Prob. 9.2BE Ch. 9 - Prob. 9.3BE Ch. 9 - Prob. 9.4BE Ch. 9 - Prob. 9.5BE Ch. 9 - Sales Discounts, Most-Likely-Amount Method. On...Ch. 9 - Allowance for Uncollectible Accounts, Write-Off....Ch. 9 - Allowance for Uncollectible Accounts, Write-Off....Ch. 9 - Allowance for Uncollectible Accounts, Recovery....Ch. 9 - Bad Debt Expense, Journal Entry. Paul Anchor...Ch. 9 - Bad Debt Expense. Journal Entry. Paul Anchor,...Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Prob. 9.13BE Ch. 9 - Prob. 9.14BE Ch. 9 - Prob. 9.15BE Ch. 9 - Assigned Receivables. Using the information...Ch. 9 - Factoring Receivables without Recourse. Nicks...Ch. 9 - Prob. 9.18BE Ch. 9 - Prob. 9.19BE Ch. 9 - Prob. 9.20BE Ch. 9 - Prob. 9.21BE Ch. 9 - Prob. 9.22BE Ch. 9 - Internal Controls. Identify whether the following...Ch. 9 - Prob. 9.24BE Ch. 9 - Prob. 9.25BE Ch. 9 - Prob. 9.26BE Ch. 9 - Prob. 9.27BE Ch. 9 - Prob. 9.28BE Ch. 9 - Prob. 9.1E Ch. 9 - Volume Discounts, Sales Discounts. Sodesta Company...Ch. 9 - Prob. 9.3E Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable....Ch. 9 - Prob. 9.5E Ch. 9 - Prob. 9.6E Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Bad Debt Expense, Percentage of Accounts...Ch. 9 - Prob. 9.9E Ch. 9 - Assigning Receivables, Factoring Receivables....Ch. 9 - Prob. 9.11E Ch. 9 - Factoring Receivables with and without Recourse....Ch. 9 - Factoring Receivables without Recourse, Factoring...Ch. 9 - Prob. 9.14E Ch. 9 - Prob. 9.15E Ch. 9 - Prob. 9.16E Ch. 9 - Prob. 9.18E Ch. 9 - Prob. 9.1P Ch. 9 - Prob. 9.2P Ch. 9 - Prob. 9.3P Ch. 9 - Prob. 9.4P Ch. 9 - Prob. 9.5P Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Prob. 9.7P Ch. 9 - Prob. 9.8P Ch. 9 - Prob. 9.9P Ch. 9 - Prob. 9.10P Ch. 9 - Prob. 9.11P Ch. 9 - Prob. 1JC Ch. 9 - Prob. 2JC Ch. 9 - Prob. 1FSAC Ch. 9 - Prob. 1SSC Ch. 9 - Prob. 2SSC Ch. 9 - Prob. 1BCC

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