Bieber Company had the following select transactions. Prepare journal entries to

Question

Bieber Company had the following select transactions.

Prepare journal entries to record the transactions. Bieber prepares adjusting entries once a year on December 31. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

May. 1, 2014 Accepted Crane Company’s 12-month, 16% note in settlement of a $31,800 account receivable. July 1, 2014 Loaned $40,800 cash to Sam Howard on a 9-month, 14% note. Dec. 31, 2014 Accrued interest on all notes receivable. Apr. 1, 2015 Sam Howard dishonored its note; Bieber expects it will eventually collect. May. 1, 2015 Received principal plus interest on the Crane note.

Explanation / Answer

Journal Entries:

Calculation of Interest upto 31 Dec. 14:

1. On Crane Note = 31,800 x 16% = $5,088 / 12 x 8 = $3,392

2. On Sam Note = 40,800 x 14% = $5,712 / 12 x 6 = $2,856

Date Account Title Debit Credit May 1 2014 16% Notes Receivable 31,800 Account Receivable 31,800 July 1 2014 14% Note Receivable 40,800 Cash 40,800 Dec 31 2014 Accrued Interest 6,248 Interest Income 6,248 April 1,2015 Account Receivable 45,084 14% Note Receivable 40,800 Accrued Interest 2,856 Interest Income 1,428 May 1 2015 Cash 36,888 Interest Income 1,696 Accrued Interest 3,392 16% Note Receivable 31,800

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