Q8_40PGB - Horngren'S Financial And Managerial Accounting

Question

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

Answer

Answer:

Journal entries are recorded in Step 2. 

Step 1: Definition of the maturity date

The note’s maturity date is the date when the notes become due for the payment.

Step 2: Journal entries

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.)

	(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.)

 

 

	(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.)

 

 

	(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.)

 

 

	(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.)

 

 

	(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.)