Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

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Biology

17 June, 01:14

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

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Yael Kim · Answer 1

Cash A/c Dr $4,920

To Interest receivable $100

To Interest revenue $20

To Note receivable $4,800

(Being cash received in respect of note receivable, interest accrual is recorded)

The computation of interest receivable is shown below:

= Principal * rate of interest * number of days : (total number of days in a year)

= $4,800 * 10% * (75 days : 360 days)

= $100

The 75 days is counted from taking 14 days of October month, 30 days of November month and 31 days of December month

The computation of interest revenue is shown below:

= Principal * rate of interest * number of days : (total number of days in a year)

= $4,800 * 10% * (15 days : 360 days)

= $20

The 15 days is of Jan 1 to Jan 15