Question

1. Bennett Enterprises issues a $816,000, 30-day, 8%, note to Spectrum Industries for merchandise inventory.

   Assume a 360-day year. If required, round your answers to the nearest dollar.If an amount box does not require an entry, leave it blank.

   a. Journalize Bennett Enterprises’ entries to record:

   1. the issuance of the note.
   2. the payment of the note at maturity.

   1.
   2.

   b. Journalize Spectrum Industries’ entries to record:

   1. the receipt of the note.
   2. the receipt of the payment of the note at maturity.

   1.
   2.

Answer 1

Interest calculation = 816,000*8%*30/360 = $5,440

A)

Journal entry at the time of issuance

Note receivable account Debit. 816,000

Cash account credit. 816,000

Journal entry on the payment date

Cash account debit. 821,440

To note receivable account credit. 816,000

To interest income account credit. 5,440

B)

Journal entry for spectrum on date of receipt of note

Cash account debit. 816,000

To note payable account credit. 816,000

Journal entry on the date of payment

Note payable account debit. 816,000

Interest expense account debit. 5,440

To cash account credit. 821,440

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