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 complete the table to calculate the interest amounts at december 31st and april 30th. interest calculated through maturity date interest calculated through december 31 interest calculated from january 1 through maturity date principal rate (%) time total interest

Explanation:

Step1: Identify the principal, rate and total time

Principal ($P$) = $\$13,000$, Rate ($r$) = $7\%=0.07$, Total time ($t_{total}$) for the note = $\frac{180}{360}$ years.

Step2: Calculate the total interest through maturity

The simple - interest formula is $I = Prt$. So the total interest through maturity ($I_{total}$) is $I_{total}=P\times r\times t_{total}=13000\times0.07\times\frac{180}{360}=\$455$.

Step3: Calculate the time from November 1 to December 31

The time from November 1 to December 31 ($t_1$) is $\frac{61}{360}$ years.

Step4: Calculate the interest through December 31

Using the simple - interest formula $I = Prt$, the interest through December 31 ($I_1$) is $I_1 = 13000\times0.07\times\frac{61}{360}\approx\$155.97$.

Step5: Calculate the time from January 1 to April 30

The time from January 1 to April 30 ($t_2$) is $\frac{180 - 61}{360}=\frac{119}{360}$ years.

Step6: Calculate the interest from January 1 to April 30

Using the simple - interest formula $I = Prt$, the interest from January 1 to April 30 ($I_2$) is $I_2=13000\times0.07\times\frac{119}{360}\approx\$299.03$.

	Interest calculated through maturity date	Interest calculated through December 31	Interest calculated from January 1 through maturity date
Rate ($\%$)	$7\%$	$7\%$	$7\%$
Time	$\frac{180}{360}$	$\frac{61}{360}$	$\frac{119}{360}$
Total interest	$\$455$	$\$155.97$	$\$299.03$

For the journal entries:

December 31

Debit: Interest Receivable $\$155.97$
Credit: Interest Revenue $\$155.97$

April 30

Debit: Cash ($13000 + 455$) $\$13,455$
Credit: Notes Receivable $\$13,000$
Credit: Interest Receivable $\$155.97$
Credit: Interest Revenue $\$299.03$

Answer:

	Interest calculated through maturity date	Interest calculated through December 31	Interest calculated from January 1 through maturity date
Rate ($\%$)	$7\%$	$7\%$	$7\%$
Time	$\frac{180}{360}$	$\frac{61}{360}$	$\frac{119}{360}$
Total interest	$\$455$	$\$155.97$	$\$299.03$

Journal entries:
December 31: Debit Interest Receivable $\$155.97$, Credit Interest Revenue $\$155.97$
April 30: Debit Cash $\$13,455$, Credit Notes Receivable $\$13,000$, Credit Interest Receivable $\$155.97$, Credit Interest Revenue $\$299.03$