Question

Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on account. Assume 360 days per year.

a. Determine the due date of the note.

b. Determine the maturity value of the note. When required, round your answers to the nearest dollar.
$

c. Journalize the entry to record the receipt of the payment of the note at maturity. If an amount box does not require an entry, leave it blank. When required, round your answers to the nearest dollar.

Aug. 10

Answer 1

1. Determination of Due Date :

The months and the number of days remaining each month till 120 days are shown in the following table:

Note: The bill is issued on April 12

Month	Remaining Number of Days	Total Number of Days
April	30 - 12 = 18 days	18 days
May	31 days	49 days
June	30 days	79 days
July	31 days	110 days
August	10 days	120 days

Therefore,

Due date of the note = 10th August

2. Determination of Maturity Value of Note :

Given,

Face Value = $40,000

Interest = 6% p.a. or 0.06

Annual interest = $ 40,000 * 6% = $2,400

But the note is issued only for 120 days. So interest will only be available for 12 days which can be calculated as follows :

$2400 * (120 days ÷ 360 days )

= $800

So, Sunshine Service Center will recieve $ 40,000 , which is the face value of the note , and $800 interest on maturity.

Thus, Maturity Value of the Note = $40,800

3) Journal Entries:

Date	Particulars	Debit	Credit
Aug 10	Notes Receivable	$40,000
	Accounts Receivable		$40,000
	[ Being the accounts receivable reduced to the value of the note, upon receipt of the note ]
Aug 10	Cash	$40,800
	Notes Receivable		$40,000
	Interest		$800
	[ Being the entry for showing the cash received and interest being recorded ]