Ouellette Co. adjusts its books monthly. On June 30, 2021, notes receivable include the following:

Interest is payable on the first day of each month for notes with terms of one year or longer. Interest is payable at maturity for notes with terms of less than one year. In July, the following transactions were completed:

July 1 Received payment of the interest due from ALD Inc.

2 Received the interest due from Kabam Ltd.

31 Collected the full amount on the Best Foot Forward Shoe Co. note.

31 Received notice that the DNR Co. note had been dishonoured. Assume that DNR Co. is expected to pay in the future.

Instructions

a. Calculate the balance in the Interest Receivable and Notes Receivable accounts at June 30, 2021.

b. Record the July transactions and the July 31 adjusting entry for accrued interest receivable.

c. Enter the balances at July 1 in the receivables accounts. Post the entries to the receivables accounts.

d. Show the balance sheet presentation of the receivables accounts at July 31, 2021.

e. How would the journal entry on July 31 be diff erent if DNR Co. were not expected to pay in the future?

The interest rate for the DNR note is higher than for the other notes. Why might that be the case?

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Issue Date Maker ALD Inc. Kabam Ltd. Best Foot Forward Shoe Co. DNR Co. M&J Hardware Corp. Interest Principal Term May 1, 2020 $ 6,000 3 years 15 months 6 months 2 months 4.0% 5.0% 5.5% 8.75% 5.0% October 31, 2020 January 31, 2021 May 31, 2021 June 30, 2021 10,000 15,000 4,800 8 months 9,000