On October 1, 2016, DeadBeat Company contacts GoodGuy Corporation to indicate that it cannot pay its account of $36,000. DeadBeat makes a 12-month note with GoodGuy at 6% APR.
For GoodGuy, record the making of the note, the December 31 adjusting entry, and the payment of the note on September 30, 2017
| Date | Accounts and explanation | Debit | Credit |
|---|---|---|---|
| October 1, 2016 | Notes receivable, DeadBeat | $36,000 |
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Accounts receivable, DeadBeat
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$36,000 |
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To record note receivable due in 12 months |
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| Date | Accounts and explanation | Debit | Credit |
|---|---|---|---|
| December 31, 2016 | Interest receivable | $540 |
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Interest revenue
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$540 |
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To record adjusting entry for interest revenue |
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The interest calculation is
Three months’ worth of interest revenue ($540) was earned in 2016.
| Date | Accounts and explanation | Debit | Credit |
|---|---|---|---|
| September 30, 2017 | Cash | $38,160 |
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Notes receivable
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$36,000 |
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Interest revenue
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$1,620 |
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Interest receivable
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$540 |
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Collected note receivable plus interest. |
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Three months’ worth of interest revenue ($540) was earned in 2016, and nine months’ worth of interest revenue ($1,620) was earned in 2017.