Question

Link Communications programs voicemail systems for businesses. For a recent project, they charged $135,000. The customer secured this amount by signing a note bearing 7% interest on February 1, 2019. Required: 1. Prepare the journal entry to record the sale on February 1, 2019. Record sale 2. Determine how much interest Link will receive if the note is repaid on December 1, 2019. Round your answer to the nearest whole dollar. $ 3. Prepare Link's journal entry to record the cash received to pay off the note and interest on December 1, 2019. If an amount box does not require an entry, leave it blank. Record collection of note

Answer 1

1) February 1, 2019, service revenue

Dr Notes receivable 135,000

Cr Service revenue 135,000

2) if the note is collected on December 1, 2019, the amount of interest revenue = $135,000 x 7% x 10/12 months = $7,875

3) December 1, 2019, cash collected

Dr Cash 142,875

Cr Notes receivable 135,000

Cr Interest revenue 7,875