Question

Sage Hill Inc. closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $24,000. Notes Receivable include the following.

Date		Maker		Face Value		Term		Maturity Date		Interest Rate
April 21		Coote Inc.		$6,000		90 days		July 20		8%
May 25		Brady Co.		7,200		60 days		July 24		10%
June 30		BMG Corp.		10,800		6 months		December 31		6%

During July, the following transactions were completed.

July 5		Made sales of $4,890 on Sage Hill Inc. credit cards.
14		Made sales of $500 on Visa credit cards. The credit card service charge is 4%.
20		Received payment in full from Coote Inc. on the amount due.
24		Received payment in full from Brady Co. on the amount due.

Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable. (Interest is computed using 360 days; omit cost of goods sold entries.)

Answer 1

1
	Date	Accounts	Debit	Credit
	July 31	Interest Receivable	$54
		Interest Revenue		$54
		(10,800 x 6% x 1/12)
2	Date	Accounts	Debit	Credit
	July 5	Accounts Receivable	$4,890
		Sales		$4,890
	July 14	Cash	$480
		Credit Card Expense	$20
		Sales		$500
	July 20	Cash	$6,120
		Interest Revenue		$120	($6,000 x 8% x 90/360)
		Note Receivable		$6,000
	July 24	Cash	$7,320
		Interest Revenue		$120	($7,200 x 10% x 60/360)
		Note Receivable		$7,200