Question

12 following are transactions for vitalo company. november 1 accepted a $13,000, 180 - day, 7% note from kelly white in granting a time extension on her past - due account receivable. december 31 adjusted the year - end accounts for the accrued interest earned on the white note. april 30 white honored her note when presented for payment. complete the table to calculate the interest amounts at december 31st and april 30th 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. interest amounts general journal use those calculated values to prepare your journal entries. view transaction list journal entry worksheet 1 2 3 accepted a $13,000, 180 - day, 7% note from kelly white in granting a time extension on her past - due account receivable. note: enter debits before credits. date general journal debit credit november 01

Explanation:

Step1: Calculate interest for December 31

The note is for $13000$, rate is $7\%$ and time from November 1 - December 31 is 61 days. Using the simple - interest formula $I = P\times r\times t$, where $P$ is principal, $r$ is rate and $t$ is time. $t=\frac{61}{360}$, $P = 13000$, $r=0.07$. So $I_{Dec31}=13000\times0.07\times\frac{61}{360}\approx152.03$.

Step2: Calculate remaining interest for April 30

The total interest for the 180 - day note is $I_{total}=13000\times0.07\times\frac{180}{360}=455$. The remaining interest from January 1 - April 30 (119 days) is $I_{Apr30}=455 - 152.03 = 302.97$.

Step3: Prepare journal entries for November 1

Debit: Notes Receivable $13000$
Credit: Accounts Receivable - Kelly White $13000$

Step4: Prepare journal entries for December 31

Debit: Interest Receivable $152.03$
Credit: Interest Revenue $152.03$

Step5: Prepare journal entries for April 30

Debit: Cash $13455$
Credit: Notes Receivable $13000$
Credit: Interest Receivable $152.03$
Credit: Interest Revenue $302.97$

Answer:

Interest at December 31: $\$152.03$
Interest at April 30: $\$302.97$
Journal entries:
November 1:

Date	General Journal	Debit	Credit
	Accounts Receivable - Kelly White		$13000$

December 31:

Date	General Journal	Debit	Credit
	Interest Revenue		$152.03$

April 30:

Date	General Journal	Debit	Credit
	Notes Receivable		$13000$
	Interest Receivable		$152.03$
	Interest Revenue		$302.97$