Chapter 1 Problem 6-19
Requirement a
April 5 Notes receivable 500,000
Accounts receivable 500,000
19 Cash 501,075
Notes receivable discounted 500,000
Interest income 1,075
Principal 500,000
Add: Interest (500,000 x 12% x 60/360) 10,000
Maturity value 510,000
Less: Discount (510,000 x 14% x 45/360) 8,925
Net proceeds 501,075
May 3 Notes receivable 1,000,000
Accounts receivable 1,000,000
16 Cash 995,000
Interest expense 5,000
Notes receivable discounted 1,000,000
Principal 1,000,000
Less: Discount (1,000,000 x 12% x 15/360) 5,000
Net proceeds 995,000
May 25 Notes receivable 1,500,000
Interest income 4,500
Accounts receivable 1,504,500
81
Principal 1,500,000
Add: Interest (1,500,000 x 12% x 60/360) 30,000
Maturity value 1,530,000
Less: Discount (1,530,000 x 12% x 50/360) 25,500
Net credit 1,504,500
June 7 Accounts receivable (510,000 + 20,000) 530,000
Cash 530,000
Notes receivable discounted 500,000
Notes receivable 500,000
15 Notes receivable 800,000
Sales 800,000
June 18 Cash 532,650
Accounts receivable 530,000
Interest income (530,000 x 12% x 15/360) 2,650
Requirement b – Adjustments on June 30
1. Accrued interest receivable 4,000
Interest income (800,000 x 12% x 15/360) 4,000
Accrued interest on D’s note.
2. Notes receivable discounted 1,000,000
Notes receivable 1,000,000
To cancel the contingent liability on B’s note. This note matured on May 31.
Since there is no notice of dishonor it is assumed that the said note is paid on
the date of maturity.
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