Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flu
ID: 2462426 • Letter: F
Question
Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:
Date
Face Amount
Term
Interest Rate
1.
Mar. 6
$80,000
45 days
5%
2.
Apr. 23
24,000
60 days
9%
3.
July 20
42,000
120 days
6%
4.
Sept. 6
54,000
90 days
7%
5.
Nov. 29
27,000
60 days
6%
6.
Dec. 30
72,000
30 days
5%
Required:
1.
Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.
2.
Journalize the entry to record the dishonor of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles.
3.
Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles.
4.
Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Flush Mate Co.
General Ledger
ASSETS
110
Cash
111
Petty Cash
120
Accounts Receivable
129
Allowance for Doubtful Accounts
131
Interest Receivable
132
Notes Receivable
141
Merchandise Inventory
145
Office Supplies
146
Store Supplies
151
Prepaid Insurance
181
Land
191
Store Equipment
192
Accumulated Depreciation-Store Equipment
193
Office Equipment
194
Accumulated Depreciation-Office Equipment
LIABILITIES
210
Accounts Payable
211
Salaries Payable
213
Sales Tax Payable
214
Interest Payable
215
Notes Payable
EQUITY
310
Owner, Capital
311
Owner, Drawing
312
Income Summary
REVENUE
410
Sales
610
Interest Revenue
EXPENSES
510
Cost of Merchandise Sold
520
Sales Salaries Expense
521
Advertising Expense
522
Depreciation Expense-Store Equipment
523
Delivery Expense
524
Repairs Expense
529
Selling Expenses
530
Office Salaries Expense
531
Rent Expense
532
Depreciation Expense-Office Equipment
533
Insurance Expense
534
Office Supplies Expense
535
Store Supplies Expense
536
Credit Card Expense
537
Cash Short and Over
538
Bad Debt Expense
539
Miscellaneous Expense
710
Interest Expense
1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.
Note
Due Date
Interest Due at Maturity
1.
$
2.
$
3.
$
4.
$
5.
$
6.
$
2. Journalize the entry to record the dishonor of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 1
JOURNAL
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1
2
3
3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles.
Date
Face Amount
Term
Interest Rate
1.
Mar. 6
$80,000
45 days
5%
2.
Apr. 23
24,000
60 days
9%
3.
July 20
42,000
120 days
6%
4.
Sept. 6
54,000
90 days
7%
5.
Nov. 29
27,000
60 days
6%
6.
Dec. 30
72,000
30 days
5%
Required:
1.
Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.
2.
Journalize the entry to record the dishonor of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles.
3.
Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles.
4.
Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. Refer to the Chart of Accounts for exact wording of account titles.
Explanation / Answer
Here we assume that no. of days in an year are 360 days.
The date on which notes issued is to be excluded while determining maturity date.
Lets understand the example of due date
Date of issue Mar 06
Term 45 days
Date of maturity = ?
March = 31-6 = 25
April = 45 -25 = 20
Tge date of maturity is 20 April
Statement showing calculation of Interest & Maturity Date
Date
Face Amount
Term
Interest Rate
Interest Detail
Interest Amount
Maturity Date
Mar-06
80000
45 days
5%
80000*0.05*45/360
500
20-Apr
Apr-23
24000
60 days
9%
24000*0.09*60/360
360
22-Jun
Jul-20
42000
120 days
6%
42000*0.06*120/360
840
17-Nov
Sep-06
54000
90 days
7%
54000*0.07*90/360
945
05-Dec
Nov-29
27000
60 days
6%
27000*0.06*60/360
270
28-Jan
Dec-30
72000
30 days
5%
72000*0.05*30/360
300
29-Jan
Part 2
If a note is dishonour and interest is accrued ,the following journal entry has been passed
Note 3
Accounts Receivable 42000
Interest Income 840
Notes Receivable 42840
Part 3
Total Interest on Note 5 = $ 270
Interest as on 31 dec = 270*32/60 = $ 144
Total Interest on Note 6 = $ 300
Interest as on 31 dec = 300*1/30 = $ 10
When interest is accrued the following journal entry has been passed
Note 5
Interest Exp dr 144
Interest Payable 144
Note 6
Interest Exp dr 144
Interest Payable 144
Part 4
When there is receipt of amount due on note,the notes amounts and accrued interest received, the following journal entry has been passed
Note 5
Cash dr 27270
Notes Receivable 27000
Interest Revenue 270
Note 6
Cash dr 72300
Notes Receivable 72000
Interest Revenue 300
Statement showing calculation of Interest & Maturity Date
Date
Face Amount
Term
Interest Rate
Interest Detail
Interest Amount
Maturity Date
Mar-06
80000
45 days
5%
80000*0.05*45/360
500
20-Apr
Apr-23
24000
60 days
9%
24000*0.09*60/360
360
22-Jun
Jul-20
42000
120 days
6%
42000*0.06*120/360
840
17-Nov
Sep-06
54000
90 days
7%
54000*0.07*90/360
945
05-Dec
Nov-29
27000
60 days
6%
27000*0.06*60/360
270
28-Jan
Dec-30
72000
30 days
5%
72000*0.05*30/360
300
29-Jan