Question

The Colorado Springs Sunshine Bank received the following note during 2019:

Note	Issue Date	Principal	Interest Rate	Term
#1	July 1	$20,000	10%	1 year

DO NOT USE Days to calculate the interest in this problem. Round all calculations to the nearest whole dollar.

Format number answers with no dollar signs, commas or decimals. Format maturity date like MM/DD/YYYY, i.e. January 1, 2019 would be entered as 01/01/2019. Be sure to Include year of maturity in the maturity date.

Note 1 Maturity Date:

Note 1 Total Interest:  

Provide the values for each account that would be included in the journal entry for the collection of the principal at maturity.

Cash:  

Notes Receivable:  

Interest Receivable:  

Interest Revenue:  

Answer 1

Par value of Note receivable = $20,000

Interest rate = 10%

Interest accrued on 12/31/19 = Par value of Note receivable x Interest rate x Time period upto December 31, 2019/12

= 20,000 x 10% x 6/12

= 1000

Maturity date = 07/01/2020

Interest revenue to be recorded on 07/01/2020 = Par value of Note receivable x Interest rate x Remaining Time period/12

= 20,000 x 10% x 6/12

= 1000

Total interest = Interest accrued on 12/31/19 + Interest revenue to be recorded on 07/01/2020

= 1,000 + 1,000

= $2,000

Maturity value of note = Par value of Note receivable + Total Interest

= 20,000 + 2,000

= $22,000

Cash = $22,000

Note receivable = $20,000

Interest receivable = $1,000

Interest revenue = $1,000

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