N March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints.

Legal services total $10,400. In payment for the services, Whole Grain Bakery signs a 9% note requiring the payment of the face amount and interest to Terrell & Associates on September 1.

Required: For Terrell & Associates, record the acceptance of the note receivable on March 1 and the cash collection on September 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Question

Kody

Business

3 December, 19:52

N March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints.

Legal services total $10,400. In payment for the services, Whole Grain Bakery signs a 9% note requiring the payment of the face amount and interest to Terrell & Associates on September 1.

Required: For Terrell & Associates, record the acceptance of the note receivable on March 1 and the cash collection on September 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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Mara Horton · Answer 1

The journal entries are shown below:

On March 1

Notes receivable A/c Dr $10,400

To Service revenue A/c $10,400

(Being the acceptance of the note is recorded)

On September 1

Cash A/c Dr $10,868

To Notes receivable A/c $10,400

To Interest revenue A/c $468

(Being the cash collection is recorded)

The computation of the interest revenue is shown below:

= Notes receivable * interest rate * (number of months : total number of months in a year)

= $10,400 * 9% * (6 months : 12 months)

= $468