Question

Recording Notes Receivable: Issuance, Payment, and Default Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the custom payment six months after issuance. Consider the following transactions, which describe Marydale's experience with two such notes: a. On October 31, Marydale accepts a six-month, 12 percent note from customer A in lieu of a $3,600 cash payment for merchandise delivered on that day. b. On February 28, Marydale accepts a six-month, $2,900, 12 percent note from customer B in lieu of a $2,900 cash payment for merchandise delivered on that day. c. On April 30, customer A pays the entire note plus interest in cash. d. On August 31, customer B pays the entire note plus interest in cash.

Answer 1

The required journal entries are:

Date	Particulars	Amount ($)	Credit ($)
Oct 31	Notes receivable- A	3600
	Sales revenue		3600
	(To record sale)
Feb 28	Notes receivable- B	2900
	Sales revenue		2900
	(To record sale)
April 30	Cash	3816
	Notes receivable – A		3600
	Interest revenue/income (3600*12% *6/12)		216
	( to record collection of notes receivable)
August 31	Cash	3074
	Notes receivable – B		2900
	Interest revenue (2900*12% *6/12)		174
	( to record collection of notes receivable)