Notes Receivable Journal Entries
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On December 31, 2008, Menachem Inc. rendered services to Begin Corporation at an agreed price of $$91,844.10, accepting $36,000 down and agreeing to accept the balance in four equal installments of $18,000 receivable each December 31. An assumed interest rate of 11% is imputed.
Prepare the entries that would be recorded by Menachem Inc. for the sale and for the receipts and interest on the following dates. (Assume that the effective interest method is used for amortization purposes.)
A. December 31, 2008
B. December 31, 2009
C. December 31, 2010
D. December 31, 2011
E. December 31, 2012
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Solution Summary
The solution explains journal entries relating to notes receivables
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A. Total amount of notes receivable is 18,000X4 =72,000. The balance amount to receive is 91,844.10-36,000=$55,844.10. The discount is 72,000-55,844.10 = 16,155.90
The entry is
Cash Dr 36,000
Notes Receivable Dr 72,000
Discount on Note Receivable Cr 16,155.90
Service Revenue 91,844.10
B. Each year $18,000 would be received and the discount amortized. Under effective interest method, interest revenue = ...
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