Chapter 3: Q8BE (page 128)

Included in Gonzalez Company’s December 31 trial balance is a note receivable of $12,000. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record $300 of accrued interest, and the February 1 journal entry to record receipt of $12,400 from the borrower.

Short Answer

Expert verified

The total amount of cash received is $12,400.

Step by step solution

Step by Step SolutionStep 1: Meaning of Journal Entry

Journal entries are the first step in the accounting cycle. Journal entry is used to record all the business transactions and events. In recording the journal entry, the debit and credit should be equal.

Journal Entries:

Gonzalez’s December 31 adjusting entry and February 1 journal entry are as follows:

Journal Entry
Date	Accounts Titles and Explanations	Debit	Credit
December 31	Interest Receivable	$ 300
	Interest Revenue		$ 300

February 1	Cash	$ 12,400
	Notes Receivable		$ 12,000
	Interest Receivable		$ 300
	Interest Revenue		$ 100

Working notes:

Interest Revenue = $ 300 (Given)

Notes Receivable = $ 12,000 (Given)

Interest Receivable = $ 300 (Given)

Interest revenue = [ $12,000 × 10% × 1/12] = $100

Cash = $12,400 (Given)

Interest revenue only calculated for January month i.e., 1 month.

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Supplies
Beg. Bal	800	10 ⁄ 31	470

Salaries and Wages Expense
10 ⁄ 15	800
10 ⁄ 31	600

Unearned Service Revenue
10 ⁄ 31	400	10 ⁄ 20	650

Service Revenue
	10 ⁄ 17	2,400
	10 ⁄ 31	1,650
	10 ⁄ 31	400

Accounts Receivable
10 ⁄ 17	2,400
10 ⁄ 31	1,650

Short Answer

Step by step solution

Step by Step SolutionStep 1: Meaning of Journal Entry

Journal Entries:

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ANDERSON COOPER CO. ADJUSTED TRIAL BALANCE DECEMBER 31, 2017
	Dr.	Cr
Cash	\(19,472
Accounts Receivable	6,920
Prepaid Rent	2,280
Equipment	18,050
Accumulated Depreciation—Equipment		\) 4,895
Notes Payable		5,700
Accounts Payable		5,472
Common Stock		20,000
Retained Earnings		11,310
Dividend	3,000
Service Revenue		11,590
Salaries and Wages Expense	6,840
Rent Expense	2,260
Depreciation Expense	145
Interest Expense	83
Interest Payable		83
	\(59,050	\)59,050

MASON ADVERTISINGTRIAL BALANCEDECEMBER 31, 2017
	Unadjusted		Adjusted
	Dr.	Cr.	Dr.	Cr.
Cash	\( 11,000		\) 11,000
Accounts Receivable	20,000		23,500
Supplies	8,400		3,000
Prepaid Insurance	3,350		2,500
Equipment	60,000		60,000
Accumulated Depreciation—Equipment		\( 28,000		\) 33,000
Accounts Payable		5,000		5,000
Interest Payable		–0–		150
Notes Payable		5,000		5,000
Unearned Service Revenue		7,000		5,600
Salaries and Wages Payable		–0–		1,300
Common Stock		10,000		10,000
Retained Earnings		3,500		3,500
Service Revenue		58,600		63,500
Salaries and Wages Expense	10,000		11,300
Insurance Expense			850
Interest Expense	350		500
Depreciation Expense			5,000
Supplies Expense			5,400
Rent Expense	4,000		4,000
	\(117,100	\)117,100	\(127,050	\)127,050