Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes

Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:


Date Face Amount Term Interest Rate
1. Mar. 6 $80,000 45 days 5%
2. Apr. 23 24,000 60 days 9
3. July 20 42,000 120 days 6
4. Sept. 6 54,000 90 days 7
5. Nov. 29 27,000 60 days 6
6. Dec. 30 72,000 30 days 5






Instructions
1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.

2. Journalize the entry to record the dishonor of Note (3) on its due date.

3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January


Answer:

1.
Note
1.
2.
3.
4.
5.
(a)
Due Date
Apr. 20
June 22
Nov. 17
Dec. 5
Jan. 28
$500
360
840
945
270
(b)
Interest Due at Maturity
($80,000 × 45/360 × 5%)
($24,000 × 60/360 × 9%)
($42,000 × 120/360 × 6%)
($54,000 × 90/360 × 7%)
($27,000 × 60/360 × 6%)
6. Jan. 29 300 ($72,000 × 30/360 × 5%)
Nov. 17 Accounts Receivable 42,840
Notes Receivable 42,000
Interest Revenue 840
Dec. 31 Interest Receivable 154
Interest Revenue 154
Accrued interest.
$27,000 × 6% × 32/360 = $144
$72,000 × 5% × 1/360 10
Total $154
Jan. 28 Cash 27,270
Notes Receivable 27,000
Interest Receivable 144
Interest Revenue 126
($27,000 × 6% × 28/360).
29 Cash 72,300
Notes Receivable 72,000
Interest Receivable 10
Interest Revenue 290
($72,000 × 5% × 29/360).