Question

Daw Company’s December 31 year-end unadjusted trial balance shows a $46,000 balance in Notes Receivable. This...

Daw Company’s December 31 year-end unadjusted trial balance shows a $46,000 balance in Notes Receivable. This balance is from one 9% note dated December 1, with a period of 45 days. Assume Daw Company does not prepare reversing entries.

Prepare journal entries for December 31 and for the note’s maturity date assuming it is honored. (Use 360 days a year.)

  • 1

    Record the year-end adjustment related to this note, if any.

  • 2

    Record the journal entry on the note’s maturity date assuming it is honored. Assume Daw Company does not prepare reversing entries.


  

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Answer #1

Answer:

Date Particulars Debit Credit
Dec 31st Interest receivable $345 -
Interest income - $345
(Being interest earned for 30 days)
Jan 15th Cash $46517.5 -
Interest receivable - $345
Interest income - $172.5
Note receivable - $46000
(Being amount received from note receivable)

Workin Notes:

From Dec 1st to Dec 31st, 30 days interest is earned.

= $46000 X 9% X 30/360

= $345

Remaining 15 days interest is earned in January.

= $46000 X 9% X 15/360

= $172.5

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