Question

Question is, jul 1, sold inventory to good-mart, receiving $38000, nine month, 14% note. Ignore cost of goods sold.

oct 31, recorded cash sales for the period of $16,000. Ignore cost of goods sold.

dec 31, made an adjusting entry to accrue interst on the good-mart note.

Can someone show me how to make transition and how to get interest receivable $2660 on dr and Interest rev $2660 on cr? Thanks

Answer 1

In given situation, note receivable was $38,000 and interest rate for same is 14% per year. note issued on JUly 31. now we have to calculated interest for July to December. means 6 months.

Interest will be $38,000*14%*6 months/12 monhts

Date	Title	Debit	Credit
Jul-01	Note receivable	$ 38,000
	Sales		$ 38,000
	(To record sales)
Oct-31	Cash	$ 16,000
	Sales		$ 16,000
	(To record sales)
Dec-31	Interest receivable ($38,000*14%*6/12)	$    2,660
	Interest revenue		$    2,660
	(To record accrued interest)

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