Question

These transactions took place for Kingbird, Inc. 2016 May 1 Received a $3,000, 12-month, 6% note in exchange for an outstanding account receivable from R. Stoney. Dec. 31 Accrued interest revenue on the R. Stoney note. 2017 May 1 Received principal plus interest on the R. Stoney note. (No interest has been accrued since December 31, 2016.)

Requird:
a. Record the transactions in the general journal. The company does not make entries to accrue interest except at December 31.
b. Record journal entries in the order presented in the problem.)

Answer 1

Answer:Please see Explanation column for answers

Step-by-step explanation:

The journal entry To record note received for accounts receivable.

Date Account Title $ Explanation Debit ($) Credit ($)

May 1, 2016 Note receivable 3,000

Accounts receivable - R. Stoney 3,000

The journal entry To record Interest accrued

Date Account Title $ Explanation Debit ($) Credit ($)

Dec 31, 2016 Interest receivable 120

Interest revenue 120

Calculation:

Interest receivable = Note amount x Interest rate x (Number of months from May 1, 2016 to December 31, 2016 / Number of months in a year)

= $3,000 x 6% x (8 / 12) = $120

The journal entry To record principal plus interest on the R. Stoney note.

Date Account Title $ Explanation Debit ($) Credit ($)

May 1, 2017 Cash 3,180

Note receivable 3,000

Interest receivable 120

Interest revenue 60

Calculation:

Interest revenue = Principal x Interest rate x (Number of months from January 1, 2017 to April 30, 2017 / Number of months in a year)

= $3,000 x 6% x (4 / 12) = $60