Question

use the following information for the exercises 18 - 19 below. (algo)
(the following information applies to the questions displayed below.)
following are transactions of danica company.
december 13 accepted a $18,000, 45 - day, 6% note in granting miranda lee a time extension on her past - due account receivable.
december 31 prepared an adjusting entry to record the accrued interest on the lee note.
exercise 9 - 18 (algo) notes receivable transactions lo c2
complete the table to calculate the interest amounts at december 31st and use the calculated value to prepare your journal entries.
note: do not round your intermediate calculations. use 360 days a year.
complete this question by entering your answers in the tabs below.
interest amounts general journal
complete the table to calculate the interest amounts at december 31st.

Explanation:

Step1: Identify the principal amount

The principal amount of the note is $18,000.
Principal = $18,000

Step2: Identify the interest rate

The interest rate is 6%.
Rate ($r$) = 6% = 0.06

Step3: Calculate the time period from December 13 - December 31

The note was accepted on December 13 and the adjusting - entry is made on December 31. So the number of days from December 13 to December 31 is 31 - 13=18 days.
Time ($t$) for interest calculation through December 31 = $\frac{18}{360}$
The time to maturity is 45 days, so time ($t$) for interest calculation through maturity date = $\frac{45}{360}$

Step4: Calculate the total interest through maturity date

The formula for simple interest is $I = Prt$.
$I_{maturity}=18000\times0.06\times\frac{45}{360}$
$I_{maturity}=18000\times0.06\times0.125 = 135$

Step5: Calculate the interest through December 31

$I_{Dec31}=18000\times0.06\times\frac{18}{360}$
$I_{Dec31}=18000\times0.06\times0.05 = 54$

	Interest calculated through maturity date	Interest calculated through December 31
Rate ($\%$)	6	6
Time	$\frac{45}{360}$	$\frac{18}{360}$
Total interest	$135$	$54$

The journal entry on December 31 to record the accrued interest:
Debit: Interest Receivable $54$
Credit: Interest Revenue $54$

Answer:

	Interest calculated through maturity date	Interest calculated through December 31
Rate ($\%$)	6	6
Time	$\frac{45}{360}$	$\frac{18}{360}$
Total interest	$135$	$54$

Journal entry:
Debit: Interest Receivable $54$
Credit: Interest Revenue $54$