Question

Following are transactions of Danica Company.

Dec.		13		Accepted a $18,000, 45-day, 7% note in granting Miranda Lee a time extension on her past-due account receivable.
		31		Prepared an adjusting entry to record the accrued interest on the Lee note.

Complete the table to calculate the interest amounts at December 31^stand use the calculated value to prepare your journal entries.

Answer 1

• Requirements

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	Total Through Maturity	Interest recognised Dec 31
Principal	$18,000	$18,000
Rate %	7%	7%
Time	45/360	18/360
Total Interest	$158	$63
	[$18000 x 7% x 45/360]	[$ 18000 x 7% x 18/360]

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Date	Accounts title	Debit	Credit
13-Dec	Notes receivables	$18,000
	Accounts receivables		$18,000
	(to record acceptance)
31-Dec	Interest receivables	$63
	Interest Revenue		$63
	(to record accrual of 18 days interest revenue)