Question

The following selected transactions were completed by Interlocking Devices Co., a supplier of zippers for clothing: 20Y7 Dec. 7. Received from Unitarian Clothing and Bags Co., on account, a $96,000, 60-day, 8% note dated December 7. Dec. 31. Recorded an adjusting entry for accrued interest on the note of December 7. Dec. 31. Recorded the closing entry for interest revenue. 20Y8 Feb. 5. Received payment of note and interest from Unitarian Clothing

Answer 1

Dec 7

Dr Notes Receivable $96,000

Cr Accounts Receivable-Unitarian Clothing& Bags co. $96,000

Dec 31

Dr Interest Receivable $853

Cr Interest Revenue $853

Dec 31

Dr Interest Revenue $853

Cr Income Summary $843

Feb 5

Dr Cash $97,280

Cr Interest Receivable $853

Cr Interest Revenue $427

Cr Notes Receivable $96,000

Step-by-step explanation:

Preparation of the journal entries

Dec 7

Dr Notes Receivable $96,000

Cr Accounts Receivable-Unitarian Clothing& Bags co. $96,000

Dec 31

Dr Interest Receivable $853 ($96,000*8%*40/360)

Cr Interest Revenue $853

Dec 31

Dr Interest Revenue $853

Cr Income Summary $843

($96,000*8%*40/360)

Feb 5

Dr Cash $97,280

($96,000+$853+$427)

Cr Interest Receivable $853

($96,000*8%*40/360)

Cr Interest Revenue $427

($96,000*8%*20/360)

Cr Notes Receivable $96,000