Answer:
Nov. 1 Loaned $63,600 cash to C. Bohr on a 12-month, 9% note
Debit Notes receivable $63,600
Credit Cash $63,600
(To record notes receivable)
Debit Interest receivable $954
Credit Interest revenue $954
(To record accrued interest as at Dec 31)
Dec. 11 Sold goods to K. R. Pine, Inc., receiving a $5,400, 90-day, 8% note
Debit Notes receivable $5,400
Credit Cash $5,400
(To record notes receivable)
Debit Interest receivable $23
Credit Interest revenue $23
(To record accrued interest as at Dec 31)
16 Received a $14,400, 180-day, 6% note to settle an open account from A. Murdock
Debit Notes receivable $14,400
Credit Cash $14,400
(To record notes receivable)
Debit Interest receivable $34
Credit Interest revenue $34
(To record accrued interest as at Dec 31)
Step-by-step explanation:
Note is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest expense on the notes is calculated as: Principal x Interest Rate x Time
Nov. 1: In this case, the total interest revenue is: $63,600 x 9%/12 x 12 months = $5,724.
Interest expense as at December 31 is therefore $5,724 / 12 x 2 = $954.
Dec. 11: Total interest revenue is: $5,400 x 8%/12 x 3 months = $108.
Interest expense as at December 31 is therefore $108 / 90 days x 19 days = $23.
Dec. 16: Total interest revenue is: $14,400 x 6%/12 x 6 months = $432.
Interest expense as at December 31 is therefore $432 / 180 days x 14 days = $34.