Question

january 27 received lees payment for principal and interest on the note dated december 13. march 3 accepted a $12,000, 8%, 90 - day note in granting a time extension on the past - due account receivable of tomas company. march 17 accepted a $21,000, 30 - day, 6% note in granting h. cheng a time extension on his past - due account receivable. april 16 h. cheng dishonored his note. may 1 wrote off the h. cheng account against the allowance for doubtful accounts. june 1 received the tomas payment for principal and interest on the note dated march 3. complete the table to calculate the interest amounts and use those calculated values to prepare your journal entries. note: do not round intermediate calculations. use 360 days a year. complete this question by entering your answers in the tabs below. complete the table to calculate the interest amounts.

Explanation:

Step1: Recall simple - interest formula

The simple - interest formula is $I = P\times r\times t$, where $I$ is the interest, $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the time in years.

Step2: Analyze Tomas Company Note

For the Tomas Company note:

• Principal ($P$) = $\$12000$
• Rate ($r$) = $8\%=0.08$
• Time ($t$) for 90 - day note: $t=\frac{90}{360}=0.25$ years
• Interest calculated through maturity date: $I = 12000\times0.08\times0.25=\$240$
• Since the note is not related to December 31 in a way that requires a separate calculation for that date in the given context, we assume interest calculated through December 31 is 0 (as no information about its relation to Dec 31 is given).
• Interest calculated from January 1 through maturity date: If the note is from March 3, then from January 1 to March 3 is 61 days. $t=\frac{61}{360}$, and $I = 12000\times0.08\times\frac{61}{360}\approx\$162.67$

Step3: Analyze H Cheng Note

For the H Cheng note:

• Principal ($P$) = $\$21000$
• Rate ($r$) = $6\% = 0.06$
• Time ($t$) for 30 - day note: $t=\frac{30}{360}=\frac{1}{12}$ years
• Interest calculated through maturity date: $I = 21000\times0.06\times\frac{1}{12}=\$105$
• If the note is from March 17, through December 31: Number of days from March 17 to December 31:
• March (31 - 17)=14 days, April 30 days, May 31 days, June 30 days, July 31 days, August 31 days, September 30 days, October 31 days, November 30 days, December 31 days. Total days = $14 + 30+31+30+31+31+30+31+30+31 = 289$ days. $t=\frac{289}{360}$, and $I = 21000\times0.06\times\frac{289}{360}\approx\$1011.5$
• Interest calculated from January 1 through maturity date: From January 1 to March 17 is 76 days. $t=\frac{76}{360}$, and $I = 21000\times0.06\times\frac{76}{360}\approx\$266$

Answer:

	Interest calculated through maturity date	Interest calculated through December 31	Interest calculated from January 1 through maturity date
Tomas Company Note - Rate (%)	$8$	$8$	$8$
Tomas Company Note - Time	$\frac{90}{360}$	-	$\frac{61}{360}$
Tomas Company Note - Total Interest	$\$240$	$\$0$	$\$162.67$
H Cheng Note - Principal	$\$21000$	$\$21000$	$\$21000$
H Cheng Note - Rate (%)	$6$	$6$	$6$
H Cheng Note - Time	$\frac{30}{360}$	$\frac{289}{360}$	$\frac{76}{360}$
H Cheng Note - Total Interest	$\$105$	$\$1011.5$	$\$266$