Record the interest accrual on December 31, 2016. Record the cash collection on

Question

Record the interest accrual on December 31, 2016.

Record the cash collection on March 31, 2017.

On June 30, 2016, the Esquire Company sold some merchandise to a customer for $32,000. In payment, Esquire agreed to accept a 5% note requiring the payment of interest and principal on March 31, 2017. The 5% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2016 interest accrual, and the March 31, 2017 collection. (If no entry is required for a transaction/event, select"No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record the sale of merchandise. Note: Enter debits before credits. Date General Journal Debit Credit June 30, 2016

Explanation / Answer

Ans1 Date Journal entries Debit Credit 6/30/2016 Note receivable (debit) 32000             sales revenue (credit) 32000 12/31/2016 Interest receivable (debit) 800        Interest revenue (credit) 800 3/31/2017 Cash (debit) 33200        Interest revenue (credit) 400        Interest receivable (credit) 800       Note receivable (credit) 32000 Ans 2 2016 income before income taxes would be understated by $800 2017 income before income taxes would be overstated by $800 Working notes December-31,,2016 *Interest revenue (32000*5%*6/12) = 800 March-31,2017 *Cash [32000+(32000*5%*9/12)] = $33200 *Interest revenue (32000*5%*3/12) =$400

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