RecRoom Equipment Company received a $9,200, six-month, 9 percent note to settle a $9,200 unpaid balance owed by a customer.
1. The note is accepted by RecRoom on November 1, causing the company to increase its Notes Receivable and decrease its Accounts Receivable.
2. RecRoom adjusts its records for interest earned to its December 31 year-end.
3. RecRoom receives the interest on the note's maturity date.
4. RecRoom receives the principal on the note's maturity date.
Required:
Make journal entries:
a) Record the receipt of a note on November 1 for $8,000 to settle an outstanding accounts receivable balance of a customer.
b) Record the interest accrued on the note as of December 31.
c) Record the receipt of the interest on the note’s maturity date.
d) Record the receipt of the payment for the full principal.

RECROOM EQUIPMENT COMPANY

Date                     Description                             DR                   CR

a. Nov 1                Note Receivable                    8000

                            Allowance on debt                 1,200

                          Account Receivable                                           9,200

                  Being the settlement of customers debt

b. Dec 31                Interest receivable                 120

                          Interest   Income                                                     120

                   Being the interest accrued at the year end

c. 30 April              Cash                                        720

                           Interest receivable                                               120

                           Interest income                                                    600

             Being the receipt of interest at maturity date

d. April 30              Cash                                      8000

                           Note receivable                                                 8,000

                    Being the  settlement of principal at maturity                          

Explanation:

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