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Sign out ation.com us gaup requáre which feir Marietta College 0 newconnect Chapter 7 Quiz Help Save & Exit Subr 4 Selkirk Company obtained a $33,000 note receivable from a customer on January 1, 2018. The note, along with interest at 8%, is due on July 1, 2018. On February 28, 2018, Selkirk discounted the note at Unionville Bank. The bank's discount rate is 10%. Required: Prepare the journal entries required on February 28, 2018, to accrue interest and to record the discounting for 02346Selkirk. Assume that the discounting is accounted for as a sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the accrued interest earned

Explanation / Answer

Solution:

Interest accrued on 28.02.2018 = $33,000*8%*2/12 = $440

Face value of note = $33,000

Interest to maturity = $33,000 * 8% * 6/12 = $1,320

Maturity value = $33,000 + $1,320 = $34,320

Discount rate of bank = 10%

Discount amount = $34,320 *10% * 4/12 = $1,144

Cash proceed = $34,320 - $1,144 = $33,176

Journal Entries - Sellkirk Company Date Particulars Debit Credit 28-Feb-18 Interest receivables Dr $440.00              To Interest Revenue $440.00 (To record accrued interest on note) 28-Feb-18 Cash Dr $33,176.00 Loss on sale of note receivables Dr $264.00              To Notes receivables $33,000.00              To Interest receivables $440.00 (To record note discounted from bank)

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