I was wondering if you'd be able to help me with a Interest-Bearing Note problem. I'm in an undergraduate intermediate accounting course and some of the questions on my homework are confusing me. Here's a problem I need help with - Prepare the journal entries for Bean Company for October 1, 2015, December 31, 2015 (the company's year-end), October 1, 2016, and December 31, 2016
The Bean Company makes a Sale with an invoice price of $109,000. This sale occurs on October 1, 2015. As payment, The Bean Company accepts a note of $109,000. The note is due on October 1, 2017. The interest rate stated on the note is 2%. The market rate of interest for similar risk notes is 8%. Assume annual interest (annual compounding).
This is what I have so far:
10/01/15 Dr. Notes Receivable 109,000
Cr. Sales Revenue 97,338
Cr. Discounts on Notes Receivable 11,662
12/31/15 Dr. Interest Receivable 545
Dr. Discounts on Notes Receivable 1,402
Cr. Interest Revenue 1947
I have made the schedule of note discount amortization, but I don't know what to put down for the rest of the journal entries.