Question

The following selected transactions were completed by Interlocking Devices Co., a supplier of zippers for clothing: 2017 Dec. 7. Received from Unitarian Clothing & Bags Co., on account, a $75,000, 60-day, 3% note dated December 7. 31. Recorded an adjusting entry for accrued interest on the note of December 7. 31. Recorded the closing entry for interest revenue. 2018 Feb. 5. Received payment of note and interest from Unitarian Clothing & Bags Co. Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank. Assume 360 days in a year.

Answer 1

Answer:

The journal entry to record receiving the note would be:

December 7, 2017, promissory note received from Unitarian Clothing & Bags Co.

Dr Notes receivable 75,000

    Cr Accounts receivable 75,000

Adjusting entry to record accrued interest:

December 31, 2017, accrued interest from notes receivable

Dr Interest receivable ($75,000 x 3% x 24/360 days) 150

    Cr Interest revenue 150

December 31, 2017, closing entry for interest revenue

Dr Interest revenue 150

    Cr income summary 150

The entry to record the collection of the note receivable:

Dr Cash ($75,000 + $75,000 x 3% x 60/360) 75,375

    Cr Notes receivable 75,000

    Cr Interest receivable 150

    Cr Interest revenue 225