On August 2, 2011, JLK Co. receives...?

On August 2, 2011, JLK Co. recieves a $5,500, 90-day, 12% note from customer Tom Menke as payment on his $9000 account.

(1) Compute the maturity date for this note.

(2) Prepare JLK's journal entry for August, 2.

Update:

Part 2: Refer to the information above and prepare the journal entry assuming the note is honored by the customer on October 31, 2011.

1 Answer

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  • JKRB
    Lv 7
    8 years ago
    Best Answer

    (1) Compute the maturity date for this note.

    August 29 days remaining

    September 30 days

    October 31 days

    = 90 days

    Maturity date is October 31

    (2) Prepare JLK's journal entry for August, 2.

    Dr Notes Receivable 5,500

    Cr Accounts Receivable 5,500

    Part 2: Refer to the information above and prepare the journal entry assuming the note is honored by the customer on October 31, 2011.

    *Note: A 360 day year is normally used for these types of problems

    5,500 x 12% x 90/360 = $165 interest revenue

    Dr Cash 5,665

    Cr Notes Receivable 5,500

    Cr Interest Revenue 165

    Source(s): Accounting Fan
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