Question

On 1 March 2020, Maju Teras Bhd borrowed RM50,000 from MyBank Bhd and signed a 12% one month note payable. MyBank Bhd charged 1% initial fee on the note. Maju Teras Bhd assigned RM73,000 of its accounts receivable to MyBank Bhd as a security. During March 2020, Maju Teras Bhd collected RM70,000 of the assigned accounts receivable and RM3,000 of the sales were returned by the customers. Maju Teras Bhd paid the principal and interest on note payable to MyBank Bhd on 1 April 2020.

REQUIRED:

Prepare all journal entries for Maju Teras Bhd if the company’s reporting date is on 31 March 2020.

Answer 1

Journal Entries:

March 1

Cash a\c Dr. RM49,500

Discount on note payable Dr. RM 500

To Note payable RM50,000

(for note issued at a discount)

No entry on account receivable assigned as security.

Bank a\c Dr. RM70,000

Sales return a\c Dr. RM3000

To accounts receivable RM 73,000

(for amount collected on credit sale and sale return recorded).

March 31

Interest expense a\c Dr. RM500

To note payable RM500

(for interest recorded on year end)

Note payable a\c Dr. RM50,500

To bank RM50,500

(for amount paid)