Q33PGA - Horngren'S Financial And Managerial Accounting

Question

Consider the following transactions for CC Publishing.

2018

Dec. 6 Received a \(18,000, 90-day, 6% note in settlement of an overdue accountsreceivable from Go Go Publishing.

31 Made an adjusting entry to accrue interest on the Go Go Publishing note.

31 Made a closing entry for interest revenue.

2019

Mar. 6 Collected the maturity value of the Go Go Publishing note.

Jun. 30 Loaned \)11,000 cash to Lincoln Music, receiving a six-month, 20% note.

Oct. 2 Received a $2,400, 60-day, 20% note for a sale to Tusk Music. Ignore Cost ofGoods Sold.

Dec. 1 Tusk Music dishonored its note at maturity.

1 Wrote off the receivable associated with Tusk Music. (Use the allowance method.)

30 Collected the maturity value of the Lincoln Music note.

Journalize all transactions for CC Publishing. Round all amounts to the nearest dollar.

Step-by-Step Solution

Answer

The debit and credit side of journal totalled $67,246

Step 1: Definition of the maturity date

The note’s maturity date is the date when the notes become due. On the maturity date, the amount of the notes receivable is received by the company.

Step 2: Journal entries

Date	Particulars	Debit	Credit
Dec 6, 2018	Note Receivable	$18,000
	Accounts Receivable		$18,000
	(To entry for notes received)
Dec 31, 2018	Notes Receivable	$300
	Interest Revenue$\left(18,000\times 6\%\times \frac{25}{365}\right)$		$300
	(To entry of accrued revenue)
Dec 31, 2018	Interest Revenue	$300
	Income Summary		$300
	(To closing entry passed)
March 6, 2019	Cash	$18,267
	Notes Receivable		$18,000
	Interest Revenue		$267
	(To entry of cash received)
	$\left(\$18,000\times 6\%\times \frac{90}{365}\right)$
June 30	Notes Receivable	$11,000
	Cash		$11,000
	(To notes received)
October 2	Notes Receivable	$2,400
	Sales		$2,4000
	(To notes received)
Dec 1	Accounts Receivable	$2479
	Notes Receivable		$2,400
	Interest receivable		$79
	(To notes are dishonored)
Dec 1	Bad Debt Expense	$2,400
	Allowance For Bad Debts		$2,400
	(To entry of allowance)
Dec 30	Cash	$12,100
	Notes Receivable		$11,000
	Interest Revenue		$1,100
	(To cash received of notes)