Whispering Winds Corp. has the following transactions related to notes receivabl
ID: 2569088 • Letter: W
Question
Whispering Winds Corp. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. (Omit cost of goods sold entries.)
Explanation / Answer
Calculation of Accrued Interest
On Nov 1st transaction
Loaned $58,200 cash to C. Bohr on a 12-month, 9% note.
Interest =$58,200*9%*2/12
Interest = $873
On Dec 11th transaction
Sold goods to K. R. Pine, Inc., receiving a $5,400, 90-day, 9% note.
Interest =$5,400*9%*20days/365
Interest = $27
On Dec 16th transaction
Received a $12,000, 180-day, 7% note to settle an open account from A. Murdock
Interest =$12,000*7%*15days/365
Interest = $35
Total interest Accrued
(873+27+35)= $ 935
Journal entry
Accrued Interest a/c
$935
To Interest income a/c
$935
(Being interest accrued for 31st Dec recorded)
Calculation of Accrued Interest
On Nov 1st transaction
Loaned $58,200 cash to C. Bohr on a 12-month, 9% note.
Interest =$58,200*9%*2/12
Interest = $873
On Dec 11th transaction
Sold goods to K. R. Pine, Inc., receiving a $5,400, 90-day, 9% note.
Interest =$5,400*9%*20days/365
Interest = $27
On Dec 16th transaction
Received a $12,000, 180-day, 7% note to settle an open account from A. Murdock
Interest =$12,000*7%*15days/365
Interest = $35
Total interest Accrued
(873+27+35)= $ 935
Journal entry
Accrued Interest a/c
$935
To Interest income a/c
$935
(Being interest accrued for 31st Dec recorded)
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