Question

Exercise 1

Prepare journal entries to record the following transactions entered into by ABC Company:

2020

Aug.     1          Received a $30,000, 12%, 1-year note from Davis Cortez as full payment on his account.

Sept.    10        Sold merchandise on account to Melendez, Inc. for $20,000, terms 2/10, n/30.

Oct.      9          Received payment in full from Melendez, Inc.

Dec.     31        Accrued interest on Cortez's note.

  2021   

Aug.     1          Davis Cortez honored his promissory note by sending the face amount plus interest. No interest has been accrued in 2021.

Answer 1

Date	Account	Debit	Credit
Aug 1	Notes Receivable	30,000
	Accounts Receivable - Davis		30,000
Sep 10	Accounts receivable - Melendez	20,000
	Sales		20,000
Oct 9	Cash	20,000
	Accounts Receivable - Melendez		20,000
Dec 31	Interest receivable	1500
	Interest revenue		150
	(30,000*12%*5/12)
Aug 1	Cash	33,600
	Notes Receivable		30,000
	Interest receivable		1500
	Interest revenue (30,000*12%*7/12)		2100