Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes:

Gen-X Ads Co. produces advertising videos. During the current fiscal year, Gen-X Ads Co. received the following notes:


Date Face Amount Term Interest Rate
1. Jan. 14 $33,000 30 days 4%
2. Mar. 9 60,000 45 days 7
3. July 12 48,000 90 days 5
4. Aug. 23 16,000 75 days 6
5. Nov. 15 36,000 60 days 8
6. Dec. 10 24,000 60 days 6




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 and February


Answer:


1.
Note
1.
2.
3.
4.
5.
(a)
Due Date
Feb. 13
Apr. 23
Oct. 10
Nov. 6
Jan. 14
$110
525
600
200
480
(b)
Interest Due at Maturity
($33,000 × 30/360 × 4%)
($60,000 × 45/360 × 7%)
($48,000 × 90/360 × 5%)
($16,000 × 75/360 × 6%)
($36,000 × 60/360 × 8%)
6. Feb. 8 240 ($24,000 × 60/360 × 6%)
2
Oct. 10 Accounts Receivable 48,600
Notes Receivable 48,000
Interest Revenue 600
Dec. 31 Interest Receivable 452
Interest Revenue 452
Accrued interest.
$36,000 × 8% × 46/360 = $368
$24,000 × 6% × 21/360 84
Total $452
Jan. 14 Cash 36,480
Notes Receivable 36,000
Interest Receivable 368
Interest Revenue 112
($36,000 × 8% × 14/360).
Feb. 8 Cash 24,240
Notes Receivable 24,000
Interest Receivable 84
Interest Revenue 156
($24,000 × 6% × 39/360).