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1 July, 08:52

Kelly Realty loaned money and received the following notes during 2018:Note Date Principal Amount Interest Rate Term (1) Oct. 1 $28,000 6% 1 year (2) Jun. 30 22,000 10% 9 months (3) Sep. 19 14,000 14% 90 daysRequired:1. Determine the maturity date and maturity value of each note. 2. Journalize the entries to establish each note Receivable and to record collection of principle and interest at maturity. Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note. Explanations are not required. (Round to the nearest dollar)

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  1. 1 July, 12:33
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    Kelly Realty

    1. Determination of Maturity Date and Value for each note:

    Note Principal Interest Rate Maturity Date Maturity Value

    1. $28,000 6% Sept. 30 2019 $29,680

    2. $22,000 10% March 31, 2019 $23,650

    3. $14,000 14% Dec. 18, 2018 $14,490

    b) Journal Entries to record receivables:

    October 1:

    Debit 6% Notes Receivable $28,000

    Credit Cash Account $28,000

    June 30:

    Debit 10% Notes Receivable $22,000

    Credit Cash Account $22,000

    Sept 19:

    Debit 14% Notes Receivable $14,000

    Credit Cash Account $14,000

    c) Journal Entries to record collection of principal and interest at maturity:

    Sept. 30, 2019:

    Debit Cash Account $29,680

    Credit Interest on Note $1,680

    Credit Notes Receivable $28,000

    March 31:

    Debit Cash Account $23,650

    Credit Interest on Note $1,650

    Credit Notes Receivable $22,000

    Dec. 18, 2018:

    Debit Cash Account $14,490

    Credit Interest on Note $490

    Credit Notes Receivable $14,000

    d) Adjusting Entry:

    Dec. 31, 2018:

    Debit Interest on Notes Receivable $2,150

    Credit Interest on Notes $2,150

    Explanation:

    a) Note Date Principal Amount Interest Rate Term

    (1) Oct. 1 $28,000 6% 1 year

    (2) Jun. 30 22,000 10% 9 months

    (3) Sep. 19 14,000 14% 90 days

    b) Interest on the notes:

    Total For 2018

    1. 6% of $28,000 = $1,680 $1,680 x 4/12 = $560

    2. 10% of $22,000 x 9/12 = $1,650 $1,650 x 6/9 = $1,100

    3. 14% of $14,000 x 90/360 = $490 $490 x 90/90 = $490

    Total $3,820 $2,150

    c) Interests on notes receivable are prorated accordingly.
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