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29 August, 03:31

Following are selected transactions for Vitalo Company.

Nov. 1 Accepted a $3,000, 180-day, 7% note dated November 1 from Kelly White in granting a time extension on her past-due account receivable.

Dec. 31 Adjusted the year-end accounts for the accrued interest earned on the White note.

Apr. 30 White honored her note when presented for payment; February has 28 days for the current year.

Required:

Complete the table to calculate the interest amounts at December 31st and April 30th and use those calculated values to prepare your journal entries.

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  1. 29 August, 06:25
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    Vitalo Company

    Journal Entries

    Nov. 1 Notes Receivable $ 3000 Dr.

    Accounts Receivable $ 3000 Cr.

    Accepted a $3,000, 180-day, 7% note dated November 1 from Kelly White in granting a time extension on her past-due account receivable.

    Dec. 31 Interest Receivable $ 35 Dr.

    Interest Income $ 35 Cr.

    ($ 3000 * 7% * 180/360 = $ 3000*7% * 0.5 = $ 105) At Dec this amount would be

    ($ 105 / 6) * 2 = $35

    Adjusted the year-end accounts for the accrued interest earned on the White note.

    Apr. 30 Cash $ 3105

    Notes Receivable $ 3000

    Interest Receivable $ 105

    White honored her note when presented for payment; February has 28 days for the current year.
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