On January 2, SHB Company receives a 3-year, $10,000, noninterest bearing note, the present value of which
Question:
On January 2, SHB Company receives a 3-year, $10,000, noninterest bearing note, the present value of which is $7,722. The rate implicit on this transaction is 9%. You are completing SHB's note receivable account.
To prepare each required journal entry:
Enter the corresponding debit or credit amount in the associated column.
Round all amounts to the nearest whole number.
Not all rows in the table might be needed to complete each journal entry.
If no journal entry is needed, check the “No entry required” box at the top of the table as your response.
1. Prepare the entry to record the acquisition of the note.
No Entry Required
Account Name | Debit | Credit |
Notes receivable | ||
Discount on notes receivable | ||
Cash |
2. Prepare the adjusting entry necessary to record interest revenue at the end of the first year.
No Entry Required
Account Name | Debit | Credit |
Discount on notes receivable | ||
Interest revenue |
3. Prepare the adjusting entry necessary to record interest revenue at the end of the second year.
No Entry Required
Account Name | Debit | Credit |
Discount on notes receivable | ||
Interest revenue |
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson