Answer:
Journal entries
Explanation:
The journal entries are as follows
On June 1
Note receivable $45,000
To Cash $45,000
(Being the issuance of note receivable is recorded)
On December 31
Interest receivable A/c Dr $1,575
To Interest revenue A/c $1,575
(Being accrued interest is recorded)
The computation of accrued interest is shown below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $45,000 × 6% × (7 months ÷ 12 months)
= $1,575
The 7 months is calculated from June 1 to December 31
On June 1
Interest receivable A/c Dr $1,125
To Interest revenue A/c $1,125
(Being accrued interest is recorded)
The computation of accrued interest is shown below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $45,000 × 6% × (5 months ÷ 12 months)
= $1,125
The 5 months is calculated from January 1 to May 31
On June 1
Cash A/c Dr $47,700
To Note receivable $45,000
To Interest receivable $2,700
(Being the maturity of note receivable is recorded)
