MUST SHOW WORK 8. (10 points) Maverick, Inc. borrowed $120,000 on a 60-day disco

Question

MUST SHOW WORK

8. (10 points) Maverick, Inc. borrowed $120,000 on a 60-day discounted note from Fulshear Company dated June 13. 2012. Fulshear discounts the note at 7%. (Assume a 360-day year is used for interest calculations.) Required (1) Journalize Maverick's entries to record a. The issuance of the note b. The payment of the note at maturity. (2) Journalize Fulshear's entries to record a. The receipt of the note b. The receipt of the payment of the note at maturity. Note: Be sure to enter correct dates for each journal entry (1)

Explanation / Answer

Parties of the Bill of Exchange

1. Drawer or Maker or Creditor
2. Drawee or Debtor or Acceptor
3. Payee or who have right to get payment

Maturity Date

Due date of bill is also called maturity date and we can get three day of grace period for paying debt through bill.

Endorsement

If drawer signs on the back side of bill for giving the right to other for getting money from debtor, it will be endorsement.

Dishonour of Bill of Exchange

If drawee or debtor does not pay the money of bill of exchange on maturity, then bill will be dishonour. After this, debtor will be responsible to his unpaid dues.

Journal Entries in the books of Drawer

1. Drawer receives a bill accepted by drawee

Bill receivable account Dr.

To Drawee account

2. Drawee pays the bill on due date

Cash account Dr.

To B/R account

or

2. Drawee dishonours the bill on due date

Drawee account Dr.

To B/R account

3. If noting charges are paid by drawer

Drawer account Dr.

To Cash account

Journal Entries in the books of Drawee or Debtor

1. Drawer receives a bill accepted by drawee

Drawer account Dr.

To Bill payable account

2. Drawee pays the bill on due date

B/P Dr.

To cash account

or

2. Drawee dishonours the bill on due date

B/P account Dr.

To Drawer account

3. If noting charges are paid by drawer

Noting Charges account Dr.

To Drawer account

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