Answer:
Explanation:
The journal entries are shown below:
1. Notes receivable A/c Dr $500,000
To Cash A/c $500,000
(Being the notes receivable acceptance is recorded)
2. Interest receivable A/c Dr $45,000
To Interest revenue $45,000
(Being the interest is collected)
Interest = Principal × rate of interest × number of months ÷ (total number of months in a year)
= $500,000 × 12% × (9 months ÷ 12 months)
= $45,000
The 3 months is calculated from April 1 to December 31
3. Cash A/c Dr $560,000
To Notes receivable A/c $500,000
To Interest receivable A/c $45,000
To Interest revenue A/c $15,000
(Being cash collected recorded)
Interest revenue = Principal × rate of interest × number of months ÷ (total number of months in a year)
= $500,000 × 12% × (3 months ÷ 12 months)
= $15,000
The 3 months is calculated from December 31 to April 1
If on April 1, 2021, Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker's business The adjustment for accrued interest on December 31, 2021 as Cash collection of the note and interest on April 1, 2022 will be:
1-Apr-21
Dr Note receivables $500,000
Cr Cash $500,000
(To record money lent)
31-Dec-21
Dr Interest receivables $45,000
Cr Interest revenue $45,000
($500,000×12%×9/12)
(To record interest revenue)
1-Apr-22
Dr Cash $560,000
($500,000+$45,000+$15,000)
Cr Interest receivables $45,000
($500,000×12%×9/12)
Cr Interest revenue $15,000
($500,000×12%×3/12)
Cr Note receivables $500,000
(To record Collection of principal and interest at maturity)
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