Question

young company sells products for $40,000 on august 1, 2017, accepting a 9-month, 9% interest note. Young prepares its financial statements as of December 31,2017.

prepare all journal entries for note receivable including the collection of the note

Answer 1

Date	General Journal	Debit	Credit
August 1, 2017	Note receivable	$40,000
	Sales		$40,000
	( To record sales )
December 31, 2017	Interest receivable	$1,500
	Interest revenue		$1,500
	( To record interest revenue)
May 1, 2018	Cash	$42,700
	Interest receivable		$1,500
	Interest revenue		$1,200
	Note receivable		$40,000
	( To record note at maturity)

Interest receivable at December 31, 2021 = Note receivable x Interest rate x Time period/ 12

= 40,000 x 9% x 5/12

= $1,500

Interest revenue at May 1, 2018 = Note receivable x Interest rate x Time period/ 12

= 40,000 x 9% x 4/12

= $1,200

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