I don\'t understand why 201 is incorrect. please tell me the answer These transa
ID: 2477923 • Letter: I
Question
I don't understand why 201 is incorrect. please tell me the answer
These transactions took place for Glavine Co. 2013 1.May 1 Received a $6,700, 12-month, 6% note in exchange for an outstanding account receivalbe from S.Rooney. 2. Dec.31 Accrued interest revenue on the S.Rooney note. 2014 3.May 1 Received principal plus interest on the S.Rooney note (No interest has been accrued since December 31,2013) Record the transactions in general journal.The Company does not make entries to accure interest except at December 31.Explanation / Answer
Because you have calculated for 6 months
It is actually 8 months from May to Dec :
Interest Expense for 2013= $6,700 x 6% x 8/12=$268
Interest Expense for 2014 for 4 Months from Jan to April 30 = $6,700 x 6% x 4/12=$134
Principal + Interest = $6,700+268+134=$7,102
Journal Entries
1.On receipt of Note
Dr Notes receivable $6,700
Cr Accounts receivable $6,700
---------------------------------------------------------------------------------------
2.Accrued Interest on Dec 31 2013
Dr Interest Receivable $268
Cr Interest Income $268
-----------------------------------------------------------------------------------------------------
3.on Receipt of Principal and Interest
Dr Cash $7,102
Cr Notes Receivable $6,700
Cr Interest Receivable $ 268
Cr Interest Income $134
-------------------
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.