Question

On July 9, Mifflin Company receives an $7,200, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

Answer 1

Oct 6 Cash 7344 Dr

Interest Revenue 144 Cr

Notes Receivable 7200 Cr

Step-by-step explanation:

First we calculate the day on which notes receivable is due.

We start from July 9 as being our first day and in July there are 31 days so 31 - 8 = 23

In August there are 31 days.

In September there are 30 days.

So total days till september are 22+31+30 = 84

So the note is due to be received on October 6.

The amount of interest due is 7200 * 0.08 * 90/360 = $144

The entry to be passed on Oct 6 is a debit to cash for the amount of principal and interest (7200+144) and a credit to interest revenue of 144 and notes receivable of 7200