Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes:

Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes:

Date Face Amount Interest Rate Term 1. Jan. 14 $33,000 4% 30 days 2. Mar.  9 60,000 7 45 days 3. July 12 48,000 5 90 days 4. Aug. 23 16,000 6 75 days 5. Nov. 15 36,000 8 60 days 6. Dec. 10 24,000 6 60 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 and February.

Answer:

1.

Note

1. $110

2. 525

3. 600

4. 200

5. 480

6. Feb. 8 240

2.  Oct. 10 Accounts Receivable48,600

Notes Receivable48,000

Interest Revenue600

3.  Dec. 31 Interest Receivable452

Interest Revenue452

Accrued interest.

$36,000 × 8% × 46 ÷ 360 = $368

$24,000 × 6% × 21 ÷ 360 = 84

Total $452

4.  Jan. 14 Cash36,480

Notes Receivable36,000

Interest Receivable368

Interest Revenue112

($36,000 × 8% × 14 ÷ 360).

 Feb. 8 Cash24,240

Notes Receivable24,000

Interest Receivable84

Interest Revenue156

($24,000 × 6% × 39 ÷ 360).