Question

PROBLEM 6 Kent Company accepts from Mark Company a $3,400, 90-day, 6% note dated May 10 in settlement of Leonard’s overdue account. Required:

a. What is the maturity date of the note? Show your work (6 pts).

b. Determine the interest on the note (show your work, 5pts)

c. What entry would Kent Company make at the maturity of the date, assuming Mark Company pays the note and interest (5 pts).

Answer 1

1. Due to date is August 8

Explanation:

Days in May [31-10]	21
Days in June	30
Days in July	31
Days in August	8	Due date
Total Number of days	90

2. Interest is $50

Calculations:

Interest revenue

= $3,400 x 6% x 90/365 = $50

3. Journal Entry:

Date	Account title and explanation	Debit	Credit
Aug 8	Cash	$3,450
	Notes receivable		$3,400
	Interest revenue		$50
	[To record cash received at maturity]