Elburn Supply Co has the following transactions related to n

Elburn Supply Co. has the following transactions related to notes receivable during the last 2 months of 2017. The company does not make entries to accrue interest except at December 31. Nov. 1 Loaned $10,000 cash to Manny Lopez on a 12-month, 12% note. Dec. 11 Sold goods to Ralph Kremer, Inc., receiving a $14,400, 90-day, 10% note. 16 Received a $13,400, 180 day, 12% note in exchange for Joe Fernetti’s outstanding accounts receivable. 31 Accrued interest revenue on all notes receivable.

Tasks:

1. Journalize the transactions for Elburn Supply Co.

2. Record the collection of the Lopez note at its maturity in 2018.

2. Record the collection of the Lopez note at its maturity in 2018.

Solution

1) Date Account titles Debit Credit Nov 1 Notes Receivable $            10,000 Cash $         10,000 (To record loaned cash to Manny Lopez) Dec 11 Notes Receivable $            14,400 Sales Revenue $         14,400 (To record sales revenue) Dec 16 Notes Receivable $            13,400 Accounts receivable $         13,400 (To record notes receivable in exchange of accounts receivable) Dec 31 Accrued Interest $ 346 Interest Revenue $ 346 (To record accrued interest earned) Working: Calculation of interest earned upto December 31: Notes Amount Interest Rate period Working Interest Accrued 12% Notes $ 10,000 12% 2 months 10000*12%*2/12 $        200 10% Notes $ 14,400 10% 20 Days 14400*10%*20/360 $          80 12% Notes $ 13,400 12% 15 days 13400*12%*15/365 $          66 Total $        346 2) Date Account titles Debit Credit October 31, 2018 Cash $ 10,000 Notes Receivable $ 10,000 (to record collection of notes at its maturity)