On August 2, Jun Co. receives a $8,000, 90-day, 11.0% note from customer Ryan Albany as payment on his $8,000 account receivable. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year. (Do not round intermediate calculations. Round your answers to nearest whole dollar value. Use 360 days a year.) Record cash received on note plus interest.

Question

Greyson Phillips

Business

10 July, 03:25

On August 2, Jun Co. receives a $8,000, 90-day, 11.0% note from customer Ryan Albany as payment on his $8,000 account receivable. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year. (Do not round intermediate calculations. Round your answers to nearest whole dollar value. Use 360 days a year.) Record cash received on note plus interest.

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Flint · Answer 1

August 2 Notes Receivable 8000 Dr

Accounts Receivable - Ryan 8000 Cr

October 30 Interest receivable 220 Dr

Interest Revenue 220 Cr

October 31 Cash 8220 Dr

Notes Receivable 8000 Cr

Interest Receivable 220 Cr

Explanation:

When we receive the Note against the Accounts Receivable, we will credit the Accounts Receivable to close the account of Ryan and create a new current asset account of Notes Receivable on August 2.

On October 30, 90 days period of Note is complete so we will record the interest that is receivable for us on this note.

Interest Receivable = 8000 * 11% * 90/360 = $220

We record this as Interest Receivable as we have not received this and credit Interest revenue as it is our income.

On 31 October, when we receive cash it will be total of Notes payable and Interest so we will debit cash by 8220 and credit the Notes payable and interest receivable.