Question

Journalize the following transactions in the accounts of Simmons Company: ​

Mar. 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Co. on account.
18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Co. on account.

Apr. 30 The note dated March 1 from Bynum Co. is dishonored, and the customer’s account is charged for the note, including interest.
May 17 The note dated March 18 from Solo Co. is dishonored, and the customer’s account is charged for the note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus interest for 90 days at 8% on the total amount debited to Bynum Co. on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo Co. on May 17 for the dishonored note dated March 18.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On Mar 1

Notes Receivable $60,000  

        To Accounts Receivable  $60,000

(Being the note receivable is recorded)

On Mar 18

Notes Receivable $25,000  

       To Accounts Receivable  $25,000

(Being the note receivable is recorded)

On Apr 30

Accounts Receivable $60,600  

         To Notes Receivable  $60,000

         To Interest Revenue ($60,000 × 2 ÷ 12 × 6%) $600

(Being the note receivable and interest revenue is recorded)

On May 17

Accounts Receivable $25,375  

          To Notes Receivable  $25,000

          To Interest Revenue ($25,000 × 9% × 2 ÷ 12)  $375

(Being the note receivable and interest revenue is recorded)

On Jul 29

Cash $61,812  

          To Accounts Receivable  $60,600

          To Interest Revenue (60,600 × 8% × 90 ÷ 360) $1,212

(Being the note receivable and interest revenue is recorded)

On Aug 23

Allowance for Doubtful Accounts $25,375  

        To Accounts Receivable  $25,375

(Being the allowance for doubtful debts is recorded)