Notes Receivable Problem Prepare the following entries of Recognition Systems Co

Question

Notes Receivable Problem

Prepare the following entries of Recognition Systems Corp:

Year 2013:

Sep 1 Toekn Compnay extended the due date for its A/R balance of 5,500 by rolling it into a 90-day 8% Note Receivable.

??? Token Compnay paid its 5,500 note with interest on the due date.

The Due Date of the 90 day note was:________________________

Dec 21 Fitzhugh Industies needed more time to pay its A/R Balance of 2,800. Fitzhugh rolled its A/R balance into a 2,800 30-day 10% Note Receivable.

Dec 31 Made and Adj entry to accure interest on the Fitzhugh note.

Year 2014:

Jan 20 Collected the principal and interest on the Fitzhugh note.

Feb 5 Sold 10,000 of inventory to RichmondInc. The Sales Price was 10,000 and the COGS was 6,000. At the time of the sale, Richmond signed a 10,000 180 day 7% note Receivable.

????? ON the due date if its Note Receivable, Richmond Inc. defaulted on its payment. Calcuate the interest on the note, and roll the balance (NR+ Interest) back into A/R.

The due date of the 180 day note was__________________

Explanation / Answer

Year 2013:

Journal Entries:

Calculation of Interest:

1. 5,500 x 8% = 440 / 365 x 90 = $108.50

2. 2,800 x 10% = 280 / 365 x 10 = $7.67

3. 10,000 x 7% = 700 / 365 x 180 = $345.21

Date Account Title Debit Credit Sep1 8% Note Receivable 5,500 Account Receivable 5,500 Nov 29 Cash 5,608.50 Interest Income 108.50 8% Note Receivable 5,500 Dec 21 10% Note Receivable 2,800 Account Receivable 2,800 Dec31 Accrued Interest 7.67 Interest Income 7.67 Jan 20 Cash 2,823 10% Note Receivable 2,800 Interest Income 15.33 Accrued Interest 7.67 Feb 5 7% Note Receivable 10,000 Cost of goods sold 6,000 Sales 10,000 Inventory 6,000 4 Aug. Account Receivable 10,345.21 7% Note Receivable 10,000 Interest 345.21

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