Question

To attract retailers to its shopping center, the Marketplace Mall will lend money to tenants under formal contracts, provided that they

use it to renovate their store space. On November 1, 2020, the company loaned $100,000 to new tenants on one-year notes with
stated annual interest rates of 9 percent. Interest is to be received by Marketplace Mall on April 30, 2021, and at maturity on October
31, 2021.
Required:
Prepare journal entries that Marketplace Mall would record related to these notes on the following dates: (a) November 1, 2020; (b)
December 31, 2020 (Marketplace Mall's fiscal year-end); (c) April 30, 2021; and (d) October 31, 2021. (If no entry is required for a
transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

The Marketplace Mall records journal entries for the loan on different dates to reflect loan disbursement, interest accrual, interest receipt, and repayment of principal and interest at maturity.

Step-by-step explanation:

The Marketplace Mall's loan to tenants is structured with a 9% annual interest rate, resulting in specific accounting entries. Below are the journal entries needed on various dates.

November 1, 2020

• Debit Notes Receivable: $100,000
• Credit Cash: $100,000

This entry reflects the loan given to the tenants.

December 31, 2020

• Debit Interest Receivable: $1,500
• Credit Interest Revenue: $1,500

This entry records the accrued interest for two months (Nov and Dec) at the annual interest rate of 9%.

April 30, 2021

• Debit Cash: $2,250
• Credit Interest Receivable: $1,500
• Credit Interest Revenue: $750

This entry records the receipt of the six months' interest payment (Nov-April).

October 31, 2021

• Debit Cash: $5,250
• Credit Notes Receivable: $100,000
• Credit Interest Revenue: $5,250

This entry records the final interest and principal repayment at maturity, including income earned from May to October.