Question

On December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a $12,000, 60-day note.Required:Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customer’s repayment on February 9, 2020, assuming:1. Interest of 12% was assessed in addition to the face value of the note.2. The note was issued as a $12,000 non-interest-bearing note with a present value of $11,765. The implicit interest rate on the note receivable was 12%. Assume a 360-day year.

Answer 1

Answer:

1) December 11, 2019

Dr Notes receivable 12,000

    Cr Sales revenue 12,000

December 31, 2019

Dr Interest receivable 80

    Cr Interest revenue 80

February 9, 2020

Dr Cash 12,240

    Cr Notes receivable 12,000

    Cr Interest revenue 160

    Cr Interest receivable 80

2) December 11, 2019

Dr Notes receivable 12,000

    Cr Sales revenue 11,764.71

    Cr Discount on notes receivable 235.29

December 31, 2019

Dr Discount on notes receivable 78.43

    Cr Interest revenue 78.43

February 9, 2020

Dr Cash 12,000

Dr Discount on notes receivable 156.86

    Cr Notes receivable 12,000

    Cr Interest revenue 156.86