Question

On May 1, 2012, a company lends $100,000 to one of its main suppliers and accepts a 12-month, 6% note. Record the acceptance of the note on May 1, 2012, the adjustment on December 31, 2012, and the cash collection on May 1, 2013.

Answer 1

Ans:-

   Journal Entries

Date	particular	LF	Amount (Dr)	Amount (Cr)
May1, 2102	Note Receivable A/c Dr To Cash A/c (Being acceptance of the note)		100,000	100,000
Dec31, 2012	Interest Receivable A/cDr. To Interest revenue (100000*6%*8/12) (Being adjustment on 4,000 interest Receivable)		4,000	4,000
May1, 2013	Cash A/c Dr To Note Receivable A/c To Interest ReceivableA/c To Interest revenue A/c (Being cash collection)		106,000	100,000 4,000 2,000

Working note:-

1) Calculation

Amt of Interest Receivable on dec31, 2012

100,000*6%*8/12 = 4,000

2) Interest revenue on May1,2013

100,000*6%*4/12= 2,000