Question

On December 31, 2017, First Tennessee Bank extends a loan to Chicago Company and receives in...

On December 31, 2017, First Tennessee Bank extends a loan to Chicago Company and receives in exchange a 5 year, $100,000 note bearing interest at 10% annually. A similar loan would be issued for 12% in the market.

Prepare the journal entry made by the bank on December 31, 2017 to record the issuance of the note.

Prepare the journal entry made by the bank to record the interest on the note on December 31, 2018:

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Answer #1

General Journal

Date

Account Title and Description

Debit

Credit

31'Dec 2017

Notes Receivable

$100,000

        Account Receivable- Chicago Company

$ 100,000

Note for Chicago Company

General Journal

Date

Account Title and Description

Debit

Credit

31'Dec 2018

Cash

$110,000

           Notes Receivable

$100,000

           Interest Revenue

$10,000

Collect Note - Chicago Company
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