Question

On April 1, a company provides services to one of its customers for $15,000. As payment for the services, the company accepts a six-month, 8% note from the customer. Record the acceptance of the note receivable on April 1 and the cash collection on October 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

The Journal entries are as follows:

(i) On April 1,

Notes receivables A/c Dr. $15,000

To service revenue $15,000

(Being notes receivables accepted)

(ii) On October 1,

Cash A/c Dr. $15,600

To Notes receivables $15,000

To Interest revenue $600

(Being cash and interest on note)

Workings:

Interest revenue = 15,000 × 8% × (6 ÷ 12)

= $600