Question

RecRoom Equipment Company received an $8,400, six-month, 5 percent note to settle an $8,400 unpaid balance owed by a customer. The note is accepted by RecRoom on November 1, causing the company to increase its Notes Receivable and decrease its Accounts Receivable. RecRoom adjusts its records for interest earned to its December 31 year-end. RecRoom receives the interest on the note's maturity date. RecRoom receives the principal on the note's maturity date. Prepare journal entries to record the above transactions for RecRoom. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

SOLUTION

Journal Entries-

S.No.	Date	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Nov.1	Note receivable	8,400
		Accounts Receivable		8,400
		(To record the receipt of notes receivable)
2.	Dec.31	Interest Receivable	70
		Interest Revenue (8,400*5%*2/12)		70
		(To record the interest accrued on notes as of Dec.31)
3.	Apr. 30	Cash	210
		Interest receivable		70
		Interest revenue (8,400*5%*4/12)		140
		(To record the receipt of interest on maturity date)
4.	Apr. 30	Cash	8,400
		Note Receivable		8,400
		(To record the receipt of payment)

answered by: anonymous