Question

Buffalo Family Importers sold goods to Tung Decorators for $36,600 on November 1, 2020, accepting Tung’s $36,600, 6-month, 6% note. Prepare Buffalo’s November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

note receivable 36,600 debit

sales revenues 36,600 credit

--to record sales to Tung's--

interest receivables 366 debit

interest receivables 366 credit

--to record accrued interest--

cash 37,698 debit

note receivables 36,600 credit

interest receivables 366 credit

interest revenues 732 credit

--to record collection from Tung's note--

Step-by-step explanation:

From the sale we accepted a note receivable.

adjusitng entry:

On December 31th we accrued the interest on the note:

principal x rate x time

months accrued: 2 (Nov 1st to Dec 31th)

36,600 x 6% x 2/12 = 366

Collection from the note:

total interest:

36,600 x 6% x 6/12 = 1,098

earned for the year: 1,098 - 366 = 732

total proceeds: 36,600 + 1,098 = 37,698