33. a. Dunn Company accepted a $400,000, 90-day, 12 percent interest-bearing not
ID: 2579021 • Letter: 3
Question
33. a. Dunn Company accepted a $400,000, 90-day, 12 percent interest-bearing note dated September 1, 2016, from a customer for an accounts receivable balance.
b. On October 1, 2016 Dunn discounted the note, with recourse, to City National Bank at a 10 percent discount rate and received $405,066. The customer paid the note to the bank at maturity.
The maturity value (MV) of the note receivable is __________ $400,000 * 12% * 90/365
The cash proceeds from discounting the note is ________ MV * 10% * 60/365. It is $411,836-$6,770 discount charged by the bank.
(1)
Make the necessary entries to record the above transactions on Dunn Company's books. Round amounts to the nearest dollar.
(2)
What entry would be required on Dunn Company's books at maturity if the customer defaults?
(1)
Make the necessary entries to record the above transactions on Dunn Company's books. Round amounts to the nearest dollar.
(2)
What entry would be required on Dunn Company's books at maturity if the customer defaults?
Explanation / Answer
(1) Make the necessary entries to record the above transactions on Dunn Company's books. Round amounts to the nearest dollar.
(2) What entry would be required on Dunn Company's books at maturity if the customer defaults?
Date Account Title and Explanation Debit Credit 1-Sep 12% Note Receivable $400,000 Accounts Receivable $400,000 (Being Note Received) 1-Oct Cash $405,066 12% Note Receivable $400,000 Interest Revenue* $5,066 (Being Note receivable discounted)Related Questions
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