MGAB02H3 Chapter Notes  Chapter 2: Effective Interest Rate
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Flush Mate Co. wholesales bathroom fixtures. During the current fiscal year, Flush Mate Co. received the following notes:
Date  Face Amount  Interest Rate  Term  

1.  Mar. 6  $84,500  6%  45 days 
2.  Apr. 23  21,700  9%  60 days 
3.  July 20  43,900  5%  120 days 
4.  Sept. 6  51,500  6%  90 days 
5.  Nov. 29  30,600  5%  60 days 
6.  Dec. 30  71,300  6%  30 days 
Required:  
1.  Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. Assume a 360day year when calculating interest.(Note: Round each interest computation to the whole dollar.) 
2.  Journalize the entry to record the dishonor A note receivable is dishonored when the maker of the note fails to pay the note on the due date. of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar. 
3.  Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar. 
4.  Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar. 
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Chart of Accounts
CHART OF ACCOUNTS  
Flush Mate Co.  
General Ledger  


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Starting Question
Shaded cells have feedback.
1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. Assume a 360day year when calculating interest. (Note: Round each interest computation to the whole dollar.)
Note  Due Date  Interest Due at Maturity 

1.  selector 1Apr. 20 June 22 Apr. 21 Apr. 20 June 9 Apr. 30  
2.  selector 2June 22 July 22 June 23 June 22 July 25 June 30  
3.  selector 3Nov. 17 Dec. 5 Nov. 20 July 1 Nov. 17 July 31  
4.  selector 4Dec. 5 Dec. 4 Dec. 5 Oct. 31 Dec. 6 Dec. 1  
5.  selector 5Jan. 28 Sep. 29 Jan. 29 Jan. 28 Nov. 28 Nov. 17  
6.  selector 6Jan. 29 Nov. 28 Jan. 30 Jan. 29 Nov. 17 Jan. 28 
Points:
12 / 12
Feedback
Check My Work
Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.
Explanation
none
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Journal
Shaded cells have feedback.
2. Journalize the entry to record the dishonor
A note receivable is dishonored when the maker of the note fails to pay the note on the due date.
of Note (3) on its due date. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar.How does grading work?
The grader is designed to give you the best score possible, even when you skip lines or enter them out of order. It does this by taking every line you have entered and comparing it to every line in the answer. When it finds the line that gives you the best score, it considers that a match.
PAGE 1
JOURNAL
ACCOUNTING EQUATION
Score: 37/37
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  â  â  â  â  
2  â  â  â  
3  â  â  â 
Solution
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  
2  
3 
Points:
7 / 7
3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar.
How does grading work?
The grader is designed to give you the best score possible, even when you skip lines or enter them out of order. It does this by taking every line you have entered and comparing it to every line in the answer. When it finds the line that gives you the best score, it considers that a match.
PAGE 1
JOURNAL
ACCOUNTING EQUATION
Score: 21/25
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  â  â  â  
2  â  â 
Solution
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  
2 
Points:
4.2 / 5
4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360day year when calculating interest. Round your answer to the nearest whole dollar.
All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.
PAGE 1
JOURNAL
ACCOUNTING EQUATION
Score: 2/99
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  
2  
3  
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7  
8 
Solution
DATE  DESCRIPTION  POST. REF.  DEBIT  CREDIT  ASSETS  LIABILITIES  EQUITY  

1  
2  
3  
4  
5  
6  
7  
8 
Points:
0.36 / 18
Feedback
Check My Work
2.
Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.
3.
(Note 5) Calculate the number of days of interest that accrues between November 29 and December 31. Remember interest is not charged on the first day of the note. Use this to calculate:
(a) Interest rate x face amount = annual interest.
(b) Annual interest x (number of days to end of year Ã· 360 days) = interest on note to the end of the year
Two accounts related to interest are used for the transaction.
(Note 6) Calculate the number of days of interest that accrues between December 30 and December 31. Remember interest is not charged on the first day of the note. Use this to calculate:
(a) Interest rate x face amount = annual interest.
(b) Annual interest x (number of days to end of year Ã· 360 days) = interest on note to the end of the year
Two accounts related to interest are used for the transaction.
4.
Cash received will include the maturity value of the note.
Explanation
1
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Need help with part 3 and 4 please.
Saverin Inc. produces and sells outdoor equipment. On July 1,2016, Saverin Inc. issued $14,000,000 of 10year, 11% bonds at amarket (effective) interest rate of 9%, receiving cash of$15,821,074. Interest on the bonds is payable semiannually onDecember 31 and June 30. The fiscal year of the company is thecalendar year.
Required:
1.  Journalize the entry to record the amount of cash proceeds fromthe issuance of the bonds on July 1, 2016.*  
2.  Journalize the entries to record the following:*
 
3.  Determine the total interest expense for 2016.  
4.  Will the bond proceeds always be greater than the face amountof the bonds when the contract rate is greater than the market rateof interest?  
5.  Compute the price of $15,821,074 received for the bonds byusing the tables shown in Present Value Tables. (Round to thenearest dollar.)
