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29 May, 08:20

Young company lends dobson industries $40,000 on august 1, 2014, accepting a 9-month, 12% interest note. if young accrued interest at its december 31, 2014 year-end, what entry must it make to record the collection of the note and interest at its maturity date?

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  1. 29 May, 11:19
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    Journal entry for the collection of the note at its maturity:

    It is given that the company lends $40,000 on august 1, 2014, accepting a 9-month, 12% interest note. And it has accrued interest at its December 31, 2014 year-end, so Interest Receivable shall be 40,000*12%*5/12 = $2,000. The journal entry to record the collection of the note and interest at its maturity date 30th April 2015 shall be as follows:

    Account titles Debit Credit

    Cash $43,600

    Interest receivable $2,000

    Interest Revenue $1,600

    Notes Receivable $40,000

    (Being notes receivable collected on its maturity date)

    (Note: The interest revenue is calculated for the period of Jan. 1, 2015 to April 30, 2015 = 40,000*12%*4/12 = $1,600)
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