Question

Journalize the following transactions for Lucite Company. Assume 360 days per year.

a. November 14: Received a $4,800.00, 90-day, 9% note from Alan Albertson in payment of his account.
b. December 31: Accrued interest on the Albertson note.
c. February 12: Received the amount due from Albertson on his note.

Answer 1

Answer:

a.

Date               Account Title                                       Debit                 Credit

Nov. 14           Note Receivable                               $4,800

                       Accounts Receivable                                                 $4,800

b.

Date               Account Title                                       Debit                 Credit

Dec, 14           Interest Receivable                             $56.40

                      Interest revenue                                                         $56.40

Working

= 4,800 * 9% * 47 days / 360

= $56.40

47 days is number of days from Nov. 14 to December 31.

c.

Date               Account Title                                       Debit                 Credit

Feb. 12           Cash                                                   $4,908

                      Interest receivable                                                          $56.40

                      Interest revenue                                                              $51.60

                      Notes Receivable                                                           $4,800

Working:

Cash = 4,800 + (4,800 * 90/360 * 9%)

= $4,908

Interest revenue = Cash - Interest receivable - Notes receivable

= 4,908 - 56.40 - 4,800

= $51.60