On December 1, 2018, Liang Chemical provides services to a customer for $85,000.

Question

On December 1, 2018, Liang Chemical provides services to a customer for $85,000. In payment for the services, the customer signs a three-year, 12% note. The face amount is due at the end of the third year, while annual interest is due each December 1.

1. Record the acceptance of the note on December 1, 2018.

2. Record the interest collected on December 1 for 2019 and 2020, and the adjustment for interest revenue on December 31 for 2018, 2019, and 2020.
3. Record the cash collection on December 1, 2021.

Prepare the journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No Date General Journal Debit Credit 1 December 01, 2018 Notes receivable 85,000 Service revenue 85,000 2 December 31, 2018 Interest receivable 850 Interest revenue 850 3 December 01, 2019 Cash Interest receivable Interest revenue 4 December 31, 2019 Interest receivable Interest revenue 5 December 01, 2020 Cash Interest receivable Interest revenue 6 December 31, 2020 Interest receivable Interest revenue 7 December 01, 2021 Cash Notes receivable 85,000 Interest receivable Interest revenue

Explanation / Answer

No Date General Journal Debit Credit 1 1-Dec-18 Notes receivable 85,000 Service revenue 85,000 2 31-Dec-18 Interest receivable 850 =85000*12%/12 Interest revenue 850 3 1-Dec-19 Cash 10200 Interest receivable 850 Interest revenue 9350 =85000*12%/12*11 4 31-Dec-19 Interest receivable 850 Interest revenue 850 5 1-Dec-20 Cash 10200 Interest receivable 850 Interest revenue 9350 6 31-Dec-20 Interest receivable 850 Interest revenue 850 7 1-Dec-21 Cash 95200 Notes receivable 85000 Interest receivable 850 Interest revenue 9350

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