Spring Designs Decorators issued a 180-day, 6% note for $86,200, dated April 13

Question

Spring Designs Decorators issued a 180-day, 6% note for $86,200, dated April 13 to Jaffe Furniture Company on account. Required: A. Determine the due date of the note. B. Determine the maturity value of the note. Assume a 360-day year when calculating interest. C. Journalize the entries to record the following: (1) receipt of the note by Jaffe Furniture and (2) receipt of payment of the note at maturity. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS Jaffe Furniture Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Spring Designs Decorators 129 Allowance for Doubtful Accounts 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Store Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

Explanation / Answer

1. Maturity date = 10 October

2. Maturity value = (86200*6%*180/360)+86200 = 88786

3. Journal entry :

Date accounts & explanation debit credit apr 13 Notes receivable a/c 86200 Account receivable-springs design decorators a/c 86200 (To record receipt of note) 10 oct Cash a/c 88786 Notes receivable-springs design decorators a/c 86200 Interest revenue a/c 2586 (TO record receipt of payment of note)

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