Milton Company closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $23,800. Notes Receivable includes the following.

date Maker Face Value Term Maturity Date Interest Rate
21-Apr Coote Inc 6,000 90 Days 20-Jul 8%
25-May Brady Co 7,800 60 Days 24-Jul 10%
30-Jun BMG Co 10,000 6 Months 31-Dec 6%

During July, the following transactions were completed.
July 5 Made sales of $4,500 on Milton Company credit cards.
14 Made sales of $600 on Visa credit cards. The credit card service charge is 3%.
20 Received payment in full from Coote Inc. on the amount due.
24 Received payment in full from Brady Co. on the amount due.

Required:
a. Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable.
b. Show the balance sheet presentation of the receivable accounts at July 31.

Question

23-03-2022
Business

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Milton Company closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $23,800. Notes Receivable includes the following.

date Maker Face Value Term Maturity Date Interest Rate
21-Apr Coote Inc 6,000 90 Days 20-Jul 8%
25-May Brady Co 7,800 60 Days 24-Jul 10%
30-Jun BMG Co 10,000 6 Months 31-Dec 6%

During July, the following transactions were completed.
July 5 Made sales of $4,500 on Milton Company credit cards.
14 Made sales of $600 on Visa credit cards. The credit card service charge is 3%.
20 Received payment in full from Coote Inc. on the amount due.
24 Received payment in full from Brady Co. on the amount due.

Required:
a. Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable.
b. Show the balance sheet presentation of the receivable accounts at July 31.

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anthougo anthougo · Answer 1 · 2022-03-30T12:52:31+02:00

a) Journalizing the July transactions and the July 31 adjusting entry for accrued interest receivable for Milton Company is as follows:

July 5 Debit Credit Card $4,500

Credit Sales Revenue $4,500

Milton Company credit cards.

July 14 Debit Visa Credit Card $582

Credit Visa Credit Card Expense $18

Credit Sales Revenue $600

Visa credit cards with a service charge of 3%.

July 20 Debit Cash $6,120

Credit Notes Receivable (Coote Inc.) $6,000

Credit Interest Revenue $120

July 24 Debit Cash $7,930

Credit Notes Receivable (Brady Co.) $7,800

Credit Interest Revenue $130

Adjusting Journal Entry:

July 31 Debit Interest Receivable $50

Credit Interest Revenue $50

b. The balance sheet presentation of the receivable accounts as of July 31 is as follows:

Milton Company

Balance Sheet as of July 31:

Receivable Accounts:

Credit Cards $5,082

Notes Receivable $10,000

Interest Receivable $50

Data and Calculations:

Notes Receivable account balance = $23,800

Detailed as follows:

Date Maker Face Value Term Maturity Date Interest Rate

21-Apr Coote Inc $6,000 90 Days 20-Jul 8%

25-May Brady Co 7,800 60 Days 24-Jul 10%

30-Jun BMG Co 10,000 6 Months 31-Dec 6%

Total $23,800

Transactions Analysis:

July 5 Credit Card $4,500 Sales Revenue $4,500

Milton Company credit cards.

July 14 Visa Credit Card $582 Visa Credit Card Expense $18 Sales Revenue $600

Visa credit cards with a service charge of 3%.

July 20 Cash $6,120 Notes Receivable (Coote Inc.) $6,000 Interest Revenue $120

July 24 Cash $7,930 Notes Receivable (Brady Co.) $7,800 Interest Revenue $130

July 31 Interest Receivable $50 Interest Revenue $50

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