Q24E - Horngren'S Financial And Managerial Accounting

Question

Journalizing note receivable transactions

The following selected transactions occurred during 2018 and 2019 for Baltic Importers. The company ends its accounting year on September 30.

2018
Jul. 1	Loaned \(16,000 cash to Bud Shyne on a one-year, 8% note.
Sep. 6	Sold goods to Lawn Pro, receiving a 90-day, 6% note for \)11,000. Ignore Cost of Goods Sold.
30	Made a single entry to accrue interest revenue on both notes.
?	Collected the maturity value of the Lawn Pro note.
2019
Jul. 1	Collected the maturity value of the Shyne note.

 

Journalize all required entries. Make sure to determine the missing maturity date. Round to the nearest dollar

Step-by-Step Solution

Answer

The amount of cash collected on the maturity is $17,280.

Step 1: Definition of accounts receivables

The accounts receivables mean the amount owed by the company to its debtors. The accounts receivable is a type of current asset for the company.

Step 2: Journalizing entries

The maturity date is determined by counting the actual days from the date of issue.  The date of Issues was Sep 6, and the Maturity date was 5^th December. 

Date	Particulars	Debit	Credit
July 1	Notes Receivables- Bud Shyne	$16,000
	Cash		$16,000
	(Sold goods on account)
September 6	Accounts Receivable– Lawn Pro	$11,000
	Sale Revenue		$11,000
	(Sales of goods on account)
September 6	Note Receivable– Lawn Pro	$11,000
	Accounts Receivable – Lawn Pro		$11,000
	(Note was issued against sale)
September 30	Interest Receivable	$364
	Interest Revenue (16,000*8%*3/12)+(11,000*6%*24/360)		$364
	(Accrued interest revenue)
December 5	Cash	$11,165
	Notes Receivable-		$11,000
	Interest Receivable(11,000*6%*24/360)		$44
	Interest Revenue (11,000*6%*66/360)		$121
	(Collected note receivable plus interest.)
2019
July 1	Cash	$17,280
	Notes Receivable-		$16,000
	Interest Receivable(16,000*8%*3/12)		$320
	Interest Revenue(16,000*8%*9/12)		$960
	(Collected note receivable plus interest.)