on june 6, gold bank & trust lent $90,000 to sharri silverthorn on a 60 - day, 6% note.\nrequirements\n1…
on june 6, gold bank & trust lent $90,000 to sharri silverthorn on a 60 - day, 6% note.\nrequirements\n1. journalize for gold bank & trust the lending of the money on june 6\n2. journalize the collection of the principal and interest at maturity. specify the date. round to the nearest dollar\n\nrequirement 1. journalize for gold bank & trust the lending of the money on june 6 (record debits first, then credits. select the explanation on the last line of the journal entry table )\n\ndate accounts and explanation debit credit\njun 6
Answer
Explanation:
Requirement 1:
Step1: Lending money
When lending money, the bank records an increase in Notes Receivable (debit) and a decrease in Cash (credit).
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Jun 6 | Notes Receivable | $90,000 | |
| Cash | $90,000 | ||
| (To record lending money on a note) |
Requirement 2:
Step1: Calculate interest
The formula for simple interest is $I = P\times r\times t$, where $P=$90,000$, $r = 6%=0.06$, and $t=\frac{60}{365}$ (assuming a 365 - day year). $I=90000\times0.06\times\frac{60}{365}=\frac{90000\times0.06\times60}{365}=\frac{324000}{365}\approx$888$
Step2: Determine maturity date
June has 30 days. From June 6 to June 30: $30 - 6=24$ days. Then in July: $60 - 24 = 36$ days. So the maturity date is August 5 (since July has 31 days).
Step3: Journalize collection
When collecting principal and interest, the bank records an increase in Cash (debit), a decrease in Notes Receivable (credit), and recognizes Interest Revenue (credit).
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Aug 5 | Cash | $90000 + 888=$90,888$ | |
| Notes Receivable | $90,000$ | ||
| Interest Revenue | $888$ | ||
| (To record collection of note and interest) |
Answer:
For Requirement 1:
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Jun 6 | Notes Receivable | $90,000$ | |
| Cash | $90,000$ | ||
| (To record lending money on a note) |
For Requirement 2:
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Aug 5 | Cash | $90,888$ | |
| Notes Receivable | $90,000$ | ||
| Interest Revenue | $888$ | ||
| (To record collection of note and interest) |