Question

Jurassic Jumpers Co. (JJ Co.) offers bungee jumping for those looking for an extreme activity. JJ Co. prepares annual financial statements and has a December 31, 2017 year-end.

a. On April 1, 2017, JJ Co. took out a five-year, $890,000 bank loan with an interest rate of 3%. Interest expense is paid on the first day of each month.
b. On July 1, 2017, JJ Co. issued a two-year, $70,000 Note Receivable with an interest rate of 4%. Interest income will be collected on January 1 and July 1 of each year.
c. On December 15, 2017, JJ Co. took a university student club bungee jumping for $2,750. The student club was invoiced on 31 December 2017 and pays JJ Co. on January 15, 2018.

Required:
Record the adjusting journal entries at December 31, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Adjusting Entries
Date	General Journal	Debit	Credit
31-Dec	Interest Expense	$ 2,225.00
	Interest Payable		$ 2,225.00
	(Interest payable for the month of December)
31-Dec	Interest Receivable	$ 1,400.00
	Interest Revenue		$ 1,400.00
	(Interest revenue for 6 months recorded)
31-Dec	Accounts Receivable	$ 2,750.00
	Service revenue		$ 2,750.00
	(Service revenue earned but not billed)

Notes

Interest Expense on bank loan will be recorded for one month only because November’s interest would have already been paid on 1^st December. December’s interest will be paid on 1^st January which will be recorded as a liability.

Interest on Notes receivable is recoded for 6 months from July 1 to December 31 to be received on 1^st January.