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Entries for Notes Receivable, Including Year-End Entries

The following selected transactions were completed by Fasteners Inc. Co., a supplier of buttons and zippers for clothing:

20Y3
Nov. 21. Received from McKenna Outer Wear Co., on account, a $66,000, 60-day, 9% note dated November 21 in settlement of a past due account.
Dec. 31. Recorded an adjusting entry for accrued interest on the note of November 21.
20Y4
Jan. 20. Received payment of note and interest from McKenna Outer Wear Co.
Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank. Assume a 360-day year when calculating interest. Round answers to the nearest dollar amount.

20Y3, Nov. 21
Notes Receivable
66,000

Accounts Receivable-McKenna Outer Wear Co.
66,000
Dec. 31
Interest Receivable
660

Interest Revenue
660
20Y4, Jan. 20
Cash
66,660

Notes Receivable
66,000

Interest Receivable
660

Interest Revenue
660
is that right?

Respuesta :

icetornato
The entries you provided are almost correct, but there's a minor error in the entry for January 20, 20Y4. Let's correct it:

20Y3, Nov. 21
Notes Receivable 66,000
Accounts Receivable-McKenna Outer Wear Co. 66,000

Dec. 31
Interest Receivable 495 ([$66,000 * 9% * 40/360])
Interest Revenue 495

20Y4, Jan. 20
Cash 66,495 (Principal + Interest)
Interest Receivable 165 (Interest accrued between Dec. 31 and Jan. 20)
Notes Receivable 66,000 (Principal)
Interest Revenue 660 ([$66,000 * 9% * 60/360])

So, the corrected entry for January 20, 20Y4, is as follows:
Cash 66,495
Interest Receivable 165
Notes Receivable 66,000
Interest Revenue 660

All other entries are correct.

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