Examples of Notes Receivables and Journal Entries

The video tutorial explains how to handle loans and interest calculations through three examples. It covers the process of journalizing entries for loans, calculating interest over different periods, and making necessary adjustments at year-end. The tutorial provides detailed steps for each example, including loans that span multiple years and those that mature within the same year.

What is the principal amount of the note issued by Kilo Company to Lima Company?

• $40,000

• $50,000

• $60,000

• $70,000

How is the total interest for the nine-month note calculated?

• Principal amount times time in months

• Principal amount times interest rate times time in fractions of a year

• Principal amount times interest rate times time in months

• Principal amount times interest rate

What is the interest accrued by December 31st for the nine-month note?

• $2,250

• $2,000

• $1,500

• $1,000

Which account is debited to record the interest receivable on December 31st?

• Cash

• Interest Receivable

• Interest Revenue

• Notes Receivable

On what date does the nine-month note mature?

• May 1st

• June 1st

• March 1st

• April 1st

What is the total cash received upon maturity of the note?

• $53,000

• $50,000

• $51,500

• $52,250

In the second example, why is there no need for a year-end adjustment?

• The note matures before December 31st

• The note matures after December 31st

• The interest rate is different

• The principal amount is different

What is the total interest for the February 1st note?

• $2,500

• $1,500

• $2,000

• $2,250

How many days are used in the bankers rule for calculating interest on the 90-day note?

• 90 days

• 365 days

• 30 days

• 360 days

What is the interest accrued by December 31st for the 90-day note?

• $750

• $250

• $1,000

• $500