Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 59

Notes receivable—interest accrual and collection On April 1, 2010, Tabor Co. received a $6,000 note from a customer in settlement of a $6,000 account receivable from that customer. The note bore interest at the rate of 15% per annum, and the note plus interest was payable March 31, 2011.

Required:

Use the horizontal model to show the effects of each of these transactions and adjustments:

a. Receipt of the note on April 1, 2010.

---

b. The accrual of interest at December 31, 2010.

---

c. The collection of the note and interest on March 31, 2011.

(Note: As an alternative to using the horizontal model, write the journal entries to show each of these transactions and adjustments.)

Step 1 of 3

Notes receivable : - Interest accrual and collection

Notes receivable : - A note receivable is a written promise to receive cash for a particular amount of money from another party on a future date.

Interest accrual (collection ):- It is the amount of interest on loan that has already earned, but has not yet been received from the borrower.