Module 4.4 - Exercise 1 I Notes Receivable and Interest...

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Unformatted text preview: Exercise 1 I Notes Receivable and Interest lcnme, Jesus almanza Jr Tue Jan 25 2011 Le Geugne LLC seld figure skating merchandise to Didier Distribution on March 18, 2008fer$1,349. Didierpaid Le Geugne $425 enthe date efsale and planned to paythe rest in a shcrtperied. Please record, on Le Gougne's booksthe March 18, 2UUBjournal entry detailing the sale to Didier. General Journal Account Title Cash ‘ Accounts Receivable ‘ a Add Credit B Class E. Walk mu tl'lmud'l a similar amith / Check Answer B Walk me through a similar problem l—l El X No, the correct credit goes to Accounts Receivable. Since Saba signed a note, it is appropriate forthe balance to move from Accounts Receivable and into Notes Receivable. We can seethatthejournal entries recordingthe sale and collection process ofthe transactions with Saba Pub reveal that the amounts in the Accounts Receivable accounthave been fully reclassified as ofOctober 31 st. Saba paid $3,000, simultaneously increasing Cash and reducing Accounts Receivable bvthat amount. Adams'acceptance ofthe note satisfiesthe remaining $0,000 in Accounts Receivable as of1 0.131. ml It is properto move the $0,000 into the Notes Receivable account because we have a written instrumentthat has replaced the less formal arrangements that : 911 Journal entry Dr Cr A9915 REC $11000 10131 Journal entry Sales $12,000 To record receipt of note Dr Or 1031 Journal entry Notes Rec $0,000 Partial Balance Sheet 311 10I31 Cash $ - $3.000 To record cash receipt Accts Rec Accts Rec $12,000 $ - 3r Cr Notes Rec $ - $9.000 Cash $3,000 Accts Rec Welcome, Jesus Almanza Jr .7 B. Receipt of Note Receivable Tue Jan 25 2o11 E z " Exel se 1 On March 1, 2000, Murat Motors sold, on account, automobile General Journal engine products to Halloran Industries for $8,000. Atthattime Account Tme Debit Clean Murat expected to receive payment in thirty days. Notes Receivable V 500'] On April 1, 2008, Halloran paid $2,000 ofthe amountdue. Murat Debit agreed to conyertthe remaining balance into a four-month note, with terms of12% (annual) interest. all payable on July 31. 2008. Accounts Receivable , Bang The entry recording the initial payment is shown below. «Crfldl Record the entry establishing the note on MuratMotors'records. Forthis Journal Entry. the number ofdebits and credits is notpre-set. You General Journal must determine the correct number ofdebits and the correct number of Amount Title Dem med-n credits. Rows may be added as needed by clicking the Add buttons. No blank rows are allowed in the final answer. Cash 2,000 Accounts Receivable 2,000 Select the correct accounts in the drop-down listsI and type in the amounts for each account.When done, click Check Answer. 4 II" J b Close _: I Walk me through a similar problem -' K , 3 Check Answer Welcome, Jesus Almanza Jr .7 C. Accrual and Receipt of Interest Tue Jan 25 2o11 Q '3 s z 'I Exercise 1 Fenaux Enterprises is a manufacturer ofcommercial oyens. On February 1, 2008. Fenaux agreed to sell a commercial oven to a cafe named Dutch Treat for $1 0,000 by accepting a note for payment in six months. The note has an annual interest rate of6%; interest is accrued monthly, but all interest will be paid with the note on August 1, 2008. Record the appropriate journal entry for Fenaux Enterprises on February 29, 2008. regardingthe accrual ofinterest onthis note. General Journal Account Title Debit iZI edit Interest Receivable V 5'] Interest Revenue V 5|] Cradt Forthis Journal Entry, the number ofdebits and credits is not pre-set. You v| Close _: I Wall: me through a similar pmblem -' K , 3 Check Answer 3 Walk me through a similar problem V Yes, Olson pavs F'hilbin $51 1250, which is the sum ofthe note receivable, interest receivable through April 30, and Mav's interest revenue. We have accounted forthe sale ofmerchandise and the corresponding collection process. In this example, Philbin sold merchandise for $5,000 and collected $1 1 2.50 in interest revenue since Olson agreedto pay on 5131 ratherthan 311. Notice in the whiteboard that the increase in Cash overthis period exactly matches the revenues overthis period. That is the end ofthis walk-through. B Close —El [fli Changein Balance Sheetfrom 311 to 5131 Cash $51125 - Cash increase of$5,112.50 Notes Receivable $5,000.00 Change in Income Statementfrom 311 to 5131 InterestReceivabIe $T5.EID - Sales Revenue on 311: $5,000.00 InterestRevenue $31.50 - Interest Revenue on 3131: $31.50 - Interest Revenue on 4130: $31.50 - Interest Revenue on 5131: $31.50 I-c-T'.‘ Welcome, Jesus Almanza Jr .7 C. Accrual and Receipt of Interest Tue Jan 25 2o11 '3 @ Exei cise 2 On February1,nI1arino Marine Equipmentsolcl several pieces ofinyentoryto Soclerberg Sails for $T,DDD, by Soclerberg signing a five-month (12% annual interest rate) note, accrued monthly but all payable on .June 30. Record on Marino's books the entry on June 30 that recognizes Soderberg's payment satisfying the note receivable. Account Title Debit iZI edit b leash I v I 735'] Notes Receivable L] ?l]l]l] [En Interest Receivable L] 230 L] ""3 '- lnterest Revenue Iiéi I = . = : . . . v Close I _= I Walk me through a similar problem Check Answer E ...
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This note was uploaded on 04/03/2011 for the course FIN 504 taught by Professor Joe during the Spring '10 term at Keller Graduate School of Management.

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Module 4.4 - Exercise 1 I Notes Receivable and Interest...

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