Question

On May 1, 2021, a company lends $110,000 to one of its main suppliers and accepts a 12-month, 7% note. Record the acceptance of the note on May 1, 2021, the adjustment on December 31, 2021, and the cash collection on May 1, 2022. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

Answer 1

Answer:

No    Date                       General Journal             Dr.         Cr.

1   May 01, 2021              Notes receivable       110,000

                                       Cash                                         110,000

2   December 31,2021   Interest receivable     5,133

                                       Interest revenue                       5,133

3   May 01, 2022             Cash                           117,700

                                       Notes receivable                      110,000

                                       Interest receivable                    5,133

                                       Interest revenue                        2,567

Explanation:

1. Loan of $110,000 agaisnt a note receivable is recorded as Note receivable to cash.

2.

Interest of 9 months is accrued in 2021.

Interest revenue: $110,000 × 7% × 8/12 = $5,133

3.

Interest of 3 months is accrued in 2022

Interest revenue: $110,000 × 7% × 4/12 = $2,567