Kelly Realty loaned money and received the following notes during 2016 EE (Click
ID: 2409856 • Letter: K
Question
Kelly Realty loaned money and received the following notes during 2016 EE (Click the icon to view the notes received.) Requirements 1. Determine the maturity date and maturity value of each note 2. Journalize the entries to establish each Note Receivable. Include a single adjusting entry on December 31, 2016, the fiscal year-end, to record accrued interest revenue on any applicable note. Explanations are not required 3. Journalize the collection of principal and interest at maturity on the three notes. Explanations are not required Requirement 1. Determine the maturity date and maturity value of each note. (For each applicable note, compute interest using a 360-day year.) Due date Note Date Principal Amount Month/Day Yea Oct. 1 Sep. 30 Jun. 19 24,000 18,000 12,000 Interest Rate 12% 5% 8% Term T year 6 months (2) 180 daysExplanation / Answer
Requirement 1
Principal
(P)
Interest Rate
(R)
Interest Period
(Int P)
Interest Revenue Earned
(P*R*Int P)
(I)
Maturity Value
P + I
Maturity Date
(mm/dd/yy)
Note 1
$24,000
12%
12/12
2,880
26,880
10/01/2017
Note 2
$18,000
6%
6/12
540
18,540
03/31/2017
Note 3
$12,000
8%
180/360
480
12,480
12/16/2016
Note 3 Calculation of Maturity Date
Month
Number of Days
Cumulative Total
June
30-19 = 11
11
July
31
42
August
31
73
September
30
103
October
31
134
November
30
164
December
16
180
Hence, 16th December 2016 is the maturity date.
Requirement 2
Journal Entries
Date
Particulars
LF
Debit
Credit
2016
Oct 1
Notes Receivables (Note 1)
24000
To Cash
24000
March 31
Notes Receivables (Note 2)
18000
To Cash
180000
Dec 16
Notes Receivables (Note 3)
12000
To Cash
12000
Dec 31
Interest Receivable
1560
Interest Revenue
1560
Principal (P)
Interest Rate (R)
Interest Period
(Int P)
Interest Revenue Earned = P*R*Int P
Note 1
24,000
0.12
3/12
720
Note 2
18,000
0.06
4/12
360
Note 3
12,000
0.08
180/360
480
1560
Requirement 3
Journal Entries
Date
Particulars
LF
Debit
Credit
2016
Oct 1
Cash
26,880
Interest Receivable
720
Interest Revenue (24000*0.12*9/12)
2160
Notes Receivable (Note1)
24000
March 31
Cash
18,630
Interest Receivable
360
Interest Revenue (18000*0.06*3/12)
270
Notes Receivable (Note2)
18000
Dec 16
Cash
12,480
Interest Receivable
480
Notes Receivable (Note3)
12000
Principal
(P)
Interest Rate
(R)
Interest Period
(Int P)
Interest Revenue Earned
(P*R*Int P)
(I)
Maturity Value
P + I
Maturity Date
(mm/dd/yy)
Note 1
$24,000
12%
12/12
2,880
26,880
10/01/2017
Note 2
$18,000
6%
6/12
540
18,540
03/31/2017
Note 3
$12,000
8%
180/360
480
12,480
12/16/2016
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