Question

On July 9, Mifflin Company receives an $7,400, 90-day, 10% 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

Answer 1

Answer and Explanation:

The journal entry is shown below:

On July 9

Cash Dr $7,585

To Interest revenue $185

To Notes receivable $7,400

(Being the entry recorded on maturity date is recorded)

For recording this we debited the cash as it increased the assets and credited the interest revenue and notes receivable as it increased the revenue and decreased the assets

The interest revenue is

= Amount × rate of interest × number of days ÷ total number of days in a year

= $7,400 × 10% × 90 days ÷ 360 days

= $185