Q40PGB
Question
Consider the following transactions for TLC Company.
2018
Dec. 6 Received a \(8,000, 90-day, 9% note in settlement of an overdue accounts
receivable from Forest Music.
31 Made an adjusting entry to accrue interest on the Forest Music note.
31 Made a closing entry for interest revenue.
2019
Mar. 6 Collected the maturity value of the Forest Music note.
Jun. 30 Loaned \)14,000 cash to Washington Music, receiving a six-month, 12% note.
Oct. 2 Received a $1,000, 60-day, 12% note for a sale to ZZZ Music. Ignore Cost of
Goods Sold.
Dec. 1 ZZZ Music dishonored its note at maturity.
1 Wrote off the receivable associated with ZZZ Music. (Use the allowance
method.)
30 Collected the maturity value of the Washington Music note
Step-by-Step Solution
VerifiedAnswer:
Journal entries are recorded in Step 2.
The note’s maturity date is the date when the notes become due for the payment.
Date | Particulars | Debit | Credit |
December 6, 2018 | Note Receivable | $8,000 |
|
| Accounts Receivable |
| $8,000 |
| (To record notes issued) |
|
|
|
|
|
|
December 31, 2018 | Interest Receivable ($8000*9%*25/365) | $49 |
|
| Interest Revenue |
| $49 |
| (To record accrued revenue) |
|
|
|
|
|
|
December 31, 2018 | Interest Revenue | $49 |
|
| Income Summary |
| $49 |
| (To record closure of accrued revenue) |
|
|
2019 |
|
|
|
March 6 | Cash | $8,178 |
|
| Notes Receivable |
| $8,000 |
| Interest Receivable |
| $49 |
| Interest Revenue ($8000*9%*65/365) |
| $129 |
| (To record cash received on maturity) |
|
|
|
|
|
|
June 30 | Notes Receivable- Washington Music | $14,000 |
|
| Cash |
| $14,000 |
| (To record notes issued) |
|
|
|
|
|
|
October 2 | Notes Receivable | $1,000 |
|
| Sales revenue |
| $1,000 |
| (To record sales revenue) |
|
|
|
|
|
|
December 1 | Accounts Receivable | $1,020 |
|
| Notes Receivable |
| $1,000 |
| Interest Receivable ($1,000*12%*60/365) |
| $20 |
| (To record notes dishonoured) |
|
|
|
|
|
|
December 1 | Bad Debt Expense | $1,020 |
|
| Allowance For Bad Debts |
| $1,020 |
| (To record bad debt expense) |
|
|
|
|
|
|
December 30 | Cash | $14,840 |
|
| Notes Receivable |
| $14,000 |
| Interest Revenue ($14,000*12%*6/12) |
| $840 |
| (To record cash received of notes on maturity.) |
|
|