Question

On December 1, 2018, Liang Chemical provides services to a customer for $83,000. In payment for the services, the customer signs a three-year, 12% note. The face amount is due at the end of the third year, while annual interest is due each December 1.

Required:

1. Record the acceptance of the note on December 1, 2018.
2. Record the interest collected on December 1 for 2019 and 2020, and the adjustment for interest revenue on December 31 for 2018, 2019, and 2020.
3. Record the cash collection on December 1, 2021.

Prepare the journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Answer 1

Answer :

1) General journal : Acceptance of note on Dec 1, 2018

Date	Account title	Debit	Credit
Dec 1, 2018	Note receivable	$83,000
	Service revenue		83,000

2)

Date	Account title	Debit	Credit
Dec 31, 2018	interest receivable	$830
	Interest revenue ($83,000 × 12% × 1/12)		$830
Dec 1, 2019	cash (83,000 × 12%)	$9,960
	Interest receivable (83,000 × 12% × 1/12)		$830
	Interest revenue (83,000 × 12% × 11/12)		$9,130
Dec 31, 2019	interest receivable	$830
	Interest revenue		$830
Dec 1, 2020	cash	$9,960
	Interest receivable		$830
	Interest revenue		$9,130
Dec 31, 2020	interest receivable	$830
	Interest revenue		$830

3)

Date	Account title	Debit	Credit
Dec 1, 2021	Cash	$92,960
	Notes receivable		$83,000
	Interest receivable		$830
	Interest revenue		$9,130