Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:

Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:

Date Face Amount Interest Rate Term 1. Mar.  6 $80,000 5% 45 days 2. Apr.  23 24,000 9 60 days 3. July  20 42,000 6 120 days 4. Sept. 6 54,000 7 90 days 5. Nov. 29 27,000 6 60 days 6. Dec. 30 72,000 5 30 days

Instructions

1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.

2. Journalize the entry to record the dishonor of Note (3) on its due date.

3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January.

Answer:

1.

Note

1. $500

2. 360

3. 840

4. 945

5. 270

6. Jan. 29 300

2.  Nov. 17 Accounts Receivable42,840

Notes Receivable42,000

Interest Revenue840

3.  Dec. 31 Interest Receivable154

Interest Revenue154

Accrued interest.

$27,000 × 6% × 32 ÷ 360 = $144

$72,000 × 5% × 1 ÷ 360 = 10

Total $154

4.  Jan. 28 Cash27,270

Notes Receivable27,000

Interest Receivable144

Interest Revenue126

($27,000 × 6% × 28 ÷ 360).

29 Cash72,300

Notes Receivable72,000

Interest Receivable10

Interest Revenue290

($72,000 × 5% × 29 ÷ 360).