On August 31, 2018, Brooke Tallen borrowed $ 6 comma 000 from Boulware State Bank. Tallen signed a note payable, promising to pay the bank principal plus interest on August 31, 2019. The interest rate on the note is 12%. The accounting year of Boulware State Bank ends on June 30, 2019. Journalize Boulware State Bank's (a) lending money on the note receivable at August 31, 2018, (b) accrual of interest at June 30, 2019, and (c) collection of principal and interest at August 31, 2019, the maturity date of the note.

When  Boulware State Bank lend money

Note Receivable $6,000 (debit)

Cash $6,000 (credit)

When Interest accrues on the Note Receivable on June 30, 2019.

Note Receivable $600 (debit)

Interest Income $600 (credit).

When the Interest and Principle are collected on August 31, 2019

Cash $6,720 (debit)

Note Receivable $6,720 (credit)

Explanation:

When  Boulware State Bank lending money

Recognize an Asset - Note Receivable and a decrease in the assets of Cash.

Note Receivable $6,000 (debit)

Cash $6,000 (credit)

When Interest accrues on the Note Receivable on June 30, 2019.

Hint :Interest that expires is for 10 months and must be accounted as such.

Note Receivable $600 (debit)

Interest Income $600 (credit)

Interest Income = $6,000 × 12% × 10/12

                          = $600.

When the Interest and Principle are collected on August 31, 2019

Interest for July and August for 2020 must first be accounted.

Note Receivable $120 (debit)

Interest Income $120 (credit)

Interest Income = $6,000 × 12% × 2/12

                          = $120.

Thus entry to record  collection of principal and interest will be :

Cash $6,720 (debit)

Note Receivable $6,720 (credit)

Note Receivable = Principle + 2019 interest + 2020 interest

                            = $6,000 + $600 + $120

                            = $6,720

answer; institution;

answer; proclamation of 1763;