Question

Valley Designs issued a 120-day, 6% note for $60,000 dated April 10 to Bork Furniture Company on account. Assume a 360-day year.

a. Determine the due date of the note: ______

Answer 1

a. The note issued by Valley Designs to Bork Furniture on April 10 matures on August 10. b. The maturity value of the $60,000 note is $61,200. c1. On April 10, Bork Furniture receives the note, journalizing a debit to Notes Receivable and a credit to Accounts Receivable. c2. On August 10, the maturity date, Bork Furniture records a debit to Accounts Receivable, a credit to Interest Revenue, and a credit to Notes Receivable, receiving $61,200 in total.

a. To determine the due date, add 120 days to the date of issue (April 10):

`\[ \text{Due Date} = \text{April 10} + 120 \text{ days} \]`

However, since we assume a 360-day year, we need to use 30 days per month:

`\[ \text{Due Date} = \text{April 10} + 4 \text{ months} = \text{August 10} \]`

b. To calculate the maturity value, use the formula:

`\[ \text{Maturity Value} = \text{Principal} + \left( \text{Principal} * \text{Rate} * \frac{\text{Time}}{\text{360}} \right) \]\[ \text{Maturity Value} = \$60,000 + \left( \$60,000 * 0.06 * (120)/(360) \right) \]\[ \text{Maturity Value} = \$60,000 + \$1,200 \]\[ \text{Maturity Value} = \$61,200 \]`

c1. Journalize the entry to record the receipt of the note by Bork Furniture:

`\[ \text{April 10} \]\\\\\text{Notes Receivable} \quad 60,000 \]\text{Accounts Receivable} \quad 60,000 \]`

c2. Journalize the entry to record the receipt of payment of the note at maturity:

`\[ \text{August 10} \]\\\\\text{Accounts Receivable} \quad 61,200 \] \text{Interest Revenue} \quad 1,200 \] \text{Notes Receivable} \quad 60,000 \]`

The complete question is:

Entries for notes receivable Valley Designs issued a 120-day, 6% note for $60,000 dated April 10 to Bork Furniture Company on the account. Assume a 360-day year. a. Determine the due date of the note. b. Determine the maturity value of the note. c1. Journalize the entry to record the receipt of the note by Bork Furniture. If an amount box does not require an entry, leave it blank. c2. Journalize the entry to record the receipt of payment of the note at maturity. If an amount box does not require an entry, leave it blank.