Question

on august 2, jun company receives a $6,700, 90-day, 10.0% note from customer ryan albany as payment on his $6,700 account receivable.prepare jun's journal entry assuming the note is honored by the customer on october 31 of that same year. (do not round intermediate calculations. round your answers to nearest whole dollar value. use 360 days a year.)

Answer 1

Jun Company's journal entry on October 31, when Ryan Albany honors the $6,700, 90-day, 10% note, will be a debit to Cash and credits to Notes Receivable and Interest Revenue for a total amount of $6,867.50.

Step-by-step explanation:

The question involves preparing a journal entry for Jun Company when a note receivable from customer Ryan Albany is honored.

On August 2, Jun Company receives a $6,700, 90-day, 10.0% note from Ryan Albany. The note is due in 90 days, and we'll assume that the year has 360 days for interest calculation purposes. The interest on this note is calculated as follows:

Interest = Principal × Rate × Time
Interest = $6,700 × 10% × (90/360)
Interest = $6,700 × 0.10 × 0.25
Interest = $167.50

The total amount due at the maturity of the note on October 31 will be the principal plus the interest.

Total Amount = Principal + Interest
Total Amount = $6,700 + $167.50
Total Amount = $6,867.50