Problem 9-6A Farewell Company_Note receivable - Interest receivable

Problem 9-6A

Farewell Company closes its books monthly. On September 30, selected ledger account balances are

Notes Recceivable           33,300

Interest receivable              260

Notes receivable include the followings:

Date                      Maker                   Face                       Term                     Interest

Aug. 16                 K. Goza Inc.        9,600                     60 Days                 12%

Aug. 25                 Holt Co.                                10,500                   60 Days                 11%

Sept. 30                Noblkt Corp        13,200                   6 months             13%

Interest is computed using a 360 day year. During October, the following transactions were completed

Oct. 7 – Made sales of $6,790 on Farewell credit cards.

Oct. 12 Made sales of $800 on Master Credit cards. The credit card service charges is 2%.

Oct. 15 – Added $540 to Farewell customer balances for finance charges on unpaid balances.

Oct. – 15 Received payment in full from K. Goza Inc. on the amount due.

Oct. – 24 Received notice that the Holt note has been dishonoured. (Assume that Holt is expected to pay in the future.

-          Journalize the transactions and the October 31 adjusting entry for the accrued interest receivable.

-          Enter the balances at October 1 in the receivable accounts. Post the entries to all of the receivable accounts.

-          Show the balance sheet presentation of the receivable at October 31.