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Chapter 2
Accounting for Receivables
AP-18B (
7
)
On January 1, 2016, Delta Company determined that it would not be able to pay the accounts
receivable that was owed to Star Company. Delta Company was confident that it would have
sufficient cash one year later, therefore signed a one‐year notes receivable for the $16,100 that
was owed. The annual interest rate is 10%, payable on July 1 and January 1. Star Company has
a year-end of June 30.
Required
a) Record the journal entry for Star Company when the note is signed.
Date
Account Title and Explanation
Debit
Credit
b) Prepare the journal entry for the year-end adjustment.
Date
Account Title and Explanation
Debit
Credit
c) Prepare the journal entry for the receipt of first interest payment.
Date
Account Title and Explanation
Debit
Credit
