Question

Accounting for notes receivable and accruing interest
Carley Realty loaned money and received the following notes during 2018.
Note Date Principal Amount Interest rate term
1. April 1 $6000 7% 1 year
2. Sept 30 $12000 6% 6 month
3. Sept 19 $18000 8% 90 days
Requirements1. Determine the maturity date and maturity value of each note.2. Journalize the entries to establish each Note Receivable and to record collection of principal and interest at maturity. Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note. Explanations are not required. Round to the nearest dollar.

Answer 1

Answer: Please see below

Explanation:

Maturity dates

I year after April 1st 2018 = April 1st 2019

6 months after sept 30 2018 = March  30, 2019

90 days after september 19=  December 18 2018

Maturity value of each note

note 1

Principal = 6000

Interest= 7%

period= 6months

interest earned= 6000 x 7% x 12/12 = 420

Maturirty value = principal + interest= 6000 + 420= $6,420

note 2

Principal = 12,000

Interest= 6%

period= 6months

interest earned= 12000 x 6% x 6/12 = 360

Maturirty value = principal + interest = $12,360

note 3

Principal = 18000

Interest= 8%

period= 90 days  

interest earned= 18000 x 8% x 90/360 = 360

Maturirty value = principal + interest = $18,360

interest revenue accured from the three notes = $420 + $360+360

=$1140

on April 1st 2018

Account                                   Debit         Credit

Notes  1 receivable             $6, 000

Cash collected                                               $6,000

september 30, 2018

Notes 2  receivable             $12,000

Cash collected                                             $12,000

September  19, 2018

Notes 3  receivable             $18,000

Cash collected                                               $18,000

December 31st 2018

Interest receivable               $1140

interest revenue                                               $1140