please explain this question as well . thanks Problem #1 : Nov. 1 11 Dec. 16 21

Question

please explain this question as well . thanks

Problem #1 : Nov. 1 11 Dec. 16 21 31 31 Received a $ 2,000, 12%, 60-day note for a sale. Received a $ 9,000, 14%, 90-day note on account. Received a $12,000, l 1%, 60-day note for cash lent to a friend. Received a $ 3,000, 12%, 30-day note on account. Received the maturity value of the Nov. 1. Accrue interest on the remaining 3 notes: $ 9,000 at 14% $12,000 at 1 1% $ 3,000 at 12% Jan. Feb. 20 9 14 Received the maturity value of the Dec. 21 note. Received the maturity value of the Nov. 11 note. Received the maturity value of the Dec. 16 note.

Explanation / Answer

Nov 1 transaction is against sale, instead of cash, a note receivable is accepted as consideration for sale.

Journal entry is

12% note receivable a/c Dr $2,000

To sales revenuce a/c Cr--------------$2,000.

(Being sales revenue recorded)

November 11 transaction

A note receivable is accepted against account receivable and journal entry for this is

14% note receivable a/c Dr-----$9,000

To Accounts receivable a/c Cr------------$9,000

(Being note receivable accepted for amount receivable from debtor)

December16, transaction

11% note receivable a/c   Dr---------12,000

To cash a/c   Cr-----------------------------------12,000.

In this transaction, cash is lent to friend against note receivable.

December 21 transaction

12% note receivable a/c Dr------$3,000.

To Accounts receivable a/c Cr -----------$3,000

In this transaction a note receivable is accepted in lieu of amount receivable against account receivable.

December 31 transaction

Assume a 360 day convention is used for calculation of interest

Cash a/c Dr          $2040.

To Note receivable a/c cr---------- $40

To interest on note receivable a/c Cr-------$2,000

Interest calculated as =2000*12%*60/360

Interest accrued on remaining note receivable is as follows:

iJournal entry is as follolws:

Interest receivable a/c Dr------ $247.17

To interest income a/c cr--------------$247.17

January 20 transaction is as follows:

Note matured and amount received along with interest.

Cash a/c   Dr--------------3041.54

To Interest receivable a/c Cr $10.00

To 12% note receivable a/c Cr $3,000

To interest income a/c Dr         $31.54

February 9, transaction:

Cash a/c   Dr--------------$9,315.

To Interest receivable a/c Cr $178.50

To 14% note receivable a/c Cr $9000

To interest income a/c Cr         $136.50

February 14 transaction is as follows:

Cash a/c   Dr--------------$12,220

To Interest receivable a/c Cr $58.67

To 14% note receivable a/c Cr $12000

To interest income a/c Cr         $161.33

Note Interest rate Amount Number of days Interest income 14% note receivable 14% 9000 51 178.5 11% note receivable 11% 12000 16 58.67 12% note receivable 12% 3000 10 10 Total 247.1666667

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