Question

Rainey Enterprises loaned $40,000 to Small Co. on June 1, Year 1, for one year at...

Rainey Enterprises loaned $40,000 to Small Co. on June 1, Year 1, for one year at 6 percent interest.

Required
a. Record these general journal entries for Rainey Enterprises: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

  1. (1) The loan to Small Co.
  2. (2) The adjusting entry at December 31, Year 1.
  3. (3) The adjusting entry and collection of the note on June 1, Year 2.

  

Journal entry worksheet

  • Record entry for loan provided to small Co. for one year at 6 percent interest.

Note: Enter debits before credits.

Journal entry worksheet

  • Record entry for loan provided to small Co. for one year at 6 percent interest.
  • Record adjusting entry for interest revenue at December 31st Year 1.
  • Record adjusting entry for interest revenue at June 1st Year 2.
  • Record entry for collection of note and interest.

Note: Enter debits before credits.
Date General Journal Debit Credit
Jun 01

  • Balance Sheet    		 Income Statement
    Assets = Liabilities + Equity
    Event Cash + Note receivable + Interest receivable = Retained earnings Revenue - Expenses = Net income
    1 $ + $    + = + - =
    2 + + $ = + $ $ - = $
    3 $   + $    + $ = + $ $    - = $
Business   Accounting   
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Homework Answers

Answer #1
Journal Entries ($)
A. June 1, year 1 Notes Receivable Dr 40,000
To Cash 40,000
(Loan lent)
B. December 31, Year 1 Interest Receivable Dr (40,000*6%*7/12) 1,400
To Interest Revenue (or Interest Income) 1,400
(Accrued for the year)
June 1, Year 2 Interest Receivable Dr (40,000*6%*5/12) 1,000
To Interest Revenue 1,000
(Interest accrued)
June 1, Year 2 Cash Dr 42,400
To Notes Receivable 40,000
To Interest Receivable 2,400
(Receipt of Loan and Interest)

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