On March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints. Legal services total $10,500. In payment for the services, Whole Grain Bakery signs a 8% 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 transaction/event, select "No journal entry required" in the first account field.)

Question

Braylen Arellano

Business

13 August, 15:50

On March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints. Legal services total $10,500. In payment for the services, Whole Grain Bakery signs a 8% 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 transaction/event, select "No journal entry required" in the first account field.)

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Jasmine Sullivan · Answer 1

The journal entries are shown below:

1. Notes receivable A/c Dr

To service revenue A/c

(Being the acceptance of the notes receivable recorded)

2. Cash A/c Dr $10,920

To notes receivable A/c $10,500

To Interest revenue A/c $420

(Being cash collection is recorded)

The interest revenue is computed below:

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

= $10,500 * 8% * (6 months : 12 months)

= $420

The 6 month is calculated from the March 1 to September 1