Following are selected transactions Deshawn Company for 2010 and 2011. 2010 Dec.
ID: 2478404 • Letter: F
Question
Following are selected transactions Deshawn Company for 2010 and 2011. 2010 Dec. 13 Accepted a $14,000, 45-day, 8% note dated December 13 in granting Latisha Clark a time extension on her past-due account receivable. 31 Prepared an adjusting entry to record the accrued interest on the Clark note. 2011 Jan. 27 Received Clark’s payment for principal and interest on the note dated December 13. Mar. 3 Accepted a $8,000, 6%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Shandi Company. 17 Accepted a $6,000, 30-day, 9% note dated March 17 in granting Juan Torres a time extension on his past-due account receivable. Apr. 16 Torres dishonors his note when presented for payment. May 1 Wrote off the Torres account against the Allowance for Doubtful Accounts. June 1 Received the Shandi payment for principal and interest on the note dated March 3. First, complete the table below to calculate the interest amounts. 1. Clark Note: 2.Shandi Company Note 3.Torres Note Use those calculated values to prepare your journal entries.
Explanation / Answer
Accounting Entries Date Account Title Dr $ Cr $ Dec 13. Accounts Receivable 14,000 Note Receivable 14,000 ( accepting note) Dec 31. Interest Income 55.23 Accrued Interest Receivable 55.23 (accrual of interest) Jan 27. Interest Income 82.85 Accrued Interest Receivable 55.23 Note Receivable 14,000 Cash 14,138.08 2 Shandi Company Note Amount of Note 8,000 Duration (from Mar 3 to June 1) 90 days Interest rate 6% Interest Amount =8000*6%*90/365= $ 118.36 Date Account Title Dr $ Cr $ Mar 3. Accounts Receivable 8,000 Note Receivable 8,000 ( accepting note) June 1. Interest Income 118.36 Note Receivable 8,000.00 Cash 8,118.36 Juan Torres Note Amount of Note 6,000 Duration (from Mar 3 to June 1) 30 days Interest rate 9% Interest Amount =6000*9%*30/365= $ 44.38 Date Account Title Dr $ Cr $ Mar 17. Accounts Receivable 6,000 Note Receivable 6,000 ( note accepted) Apr 16. Accounts Receivable 6,000 Note Receivable 6,000 ( default in note payment , assumed note will not be received) May 1. Allowance for Doubtful Accounts 6,000 Accounts Receivable 6,000 ( writing off Torres balance in Uncollectible allowance a/c)