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2 August, 23:51

Bramble Family Importers sold goods to Tung Decorators for $39,000 on November 1, 2020, accepting Tung's $39,000, 6-month, 6% note. Prepare Bramble's November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

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  1. 3 August, 00:08
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    note receivable 39,000 debit

    sales revenue 39,000 credit

    --Nov 1st to record sale of goods to Tung Decorators - -

    interest receivalbe 390 debit

    interest revenue 390 credit

    --Dec 31th adjusitng entry for accrued interest - -

    cash 40,170 debit

    note receivable 39,000 credit

    interest receivable 390 credit

    interest revenue 780 credit

    --May 1st collection of the note--

    Explanation:

    First, we record the sales revenue and we enter the promissory note at his nominal. Interest will be accrued as the time past.

    interest for the period Nov 1st - Dec 31th

    prncipal x rate x time

    we must always have rate adn time in the same metric so we express the mont has fraction of year:

    39,000 x 6% x 2/12 = 390

    collection of the note

    cash procceds: principal + interest

    39,000 x (1 + 6% x 6/12) = 40,170

    we write off both receivables, the note and the interest,

    and we recognize interest revenue for the difference

    40,170 - 39,000 - 390 = 780
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