Question

On June 30, 2021, the Esquire Company sold some merchandise to a customer for $40,000. In...

On June 30, 2021, the Esquire Company sold some merchandise to a customer for $40,000. In payment, Esquire agreed to accept a 5% note requiring the payment of interest and principal on March 31, 2022. The 5% rate is appropriate in this situation.
  
Required:
1.
Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2022 collection. (Do not round intermediate calculations.)
2. If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2021 and 2022?

Homework Answers

Answer #1

1.

Date Account Titles and Explanation Debit Credit
Jun-30 Notes receivable $40,000 -
Sales revenue - $40,000
Dec-31 Interest receivable ($40,000 X 5% X 6/12) $1,000 -
Interest revenue - $1,000
Mar-31 Cash $41,500 -
Interest receivable - $1,000
Interest revenue ($40,000 X 5% X 3/12) - $500
Notes receivable - $40,000

2.

2021 income before income taxes be understated by $1,000

2022 income before income taxes be overstated by $1,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $68,000. In...
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $68,000. In payment, Esquire agreed to accept a 9% note requiring the payment of interest and principal on March 31, 2022. The 9% rate is appropriate in this situation.    Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2022...
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $52,000. In...
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $52,000. In payment, Esquire agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2022. The 6% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2022 collection....
Exercise 7-18 (Static) Notes receivable [LO7-7] On June 30, 2021, the Esquire Company sold some merchandise...
Exercise 7-18 (Static) Notes receivable [LO7-7] On June 30, 2021, the Esquire Company sold some merchandise to a customer for $30,000. In payment, Esquire agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2022. The 6% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual,...
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing...
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing note in exchange. The note requires payment of $40,000 on March 31, 2022. The fair value of the merchandise exchanged is $37,600. Esquire views the financing component of this contract as significant. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), any December 31, 2021 interest accrual, and...
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing...
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing note in exchange. The note requires payment of $46,000 on March 31, 2022. The fair value of the merchandise exchanged is $41,860. Esquire views the financing component of this contract as significant. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), any December 31, 2021 interest accrual, and...
On June 30, 2016, the Esquire Company sold some merchandise to a customer for $30,000 and...
On June 30, 2016, the Esquire Company sold some merchandise to a customer for $30,000 and agreed to accept as payment a noninterest-bearing note with an 8% discount rate requiring the payment of $30,000 on March 31, 2017. The 8% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2016 interest accrual, and the March...
On June 30, 2018, the Esquire Company sold some merchandise to a customer for $47,000 and...
On June 30, 2018, the Esquire Company sold some merchandise to a customer for $47,000 and agreed to accept as payment a noninterest-bearing note with an 8% discount rate requiring the payment of $47,000 on March 31, 2019. The 8% rate is appropriate in this situation. Esquire views the financing component of this contract as significant. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $522,000 by Elmira on December 31, 2023. The effective interest rate is 5%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Required: 1. How much sales revenue would Wright recognize on January 1, 2021, for...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $526,000 by Elmira on December 31, 2023. The effective interest rate is 7%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Required: 1. How much sales revenue would Wright recognize on January 1, 2021, for...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In...
On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $523,000 by Elmira on December 31, 2023. The effective interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Required: 1. How much sales revenue would Wright recognize on January 1, 2021, for...