Company II White Mountain Company requests that you record journal entries for a

Question

Company II White Mountain Company requests that you record journal entries for a note it received in 2017. On April 1, 2017, White Mountain Company sold merchandise for $12,000 and received a $12,000, 3-year, 10% note. The note calls for three equal annual payments to be made beginning March 31, 2018. The market rate for notes with similar risk is 10%.

Required:

Provide the necessary journal entries for this note on the following dates:

1. April 1, 2017 [3 marks]

2. December 31, 2017 [3 marks]

3. March 31, 2018 [8 marks]

Explanation / Answer

Journal Entries :-

Date Particulars Debit($) Credit($) April 1 10% Note Receivable A/c Dr. 12000 To Sales Revenue A/c 12000 Dec. 31 Interest Receivable A/c Dr. 900 To Interest Income A/c ($12000*10%*(9/12)) 900 Mar. 31 Cash A/c Dr. 5200 To Interest A/c (12000*10%) 1200 To 10% Note Receivable A/c ($12000/3) 4000

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