Question:

Accounting pls!!?

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Mar. 1 Received a 60-day, 10% note for $24,000, dated today, from Toy Co. on account.

Apr. 30 Received amount due on note above.

Apr. 30 Received a 90-day, 10% note for $4,800, dated April 30, from Bear Co. on account.

May 10 Discounted the note dated April 30 at Third National Bank at a discount rate of 10%.

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  1. Mar. 1 Received a 60-day, 10% note for $24,000, dated today, from Toy Co. on account

    Dr  Note receivable $24,000

    Cr  Sales $24,000 (if the sale has just been made)

    or

    Cr  AR $24,000 (if transferring from AR to note receivable)

    Apr. 30 Received amount due on note above

    Dr  Cash $24,394.52

    Cr  Note receivable $24,000

    Cr  Interest revenue $394.52 (using 365 days)

    Apr. 30 Received a 90-day, 10% note for $4,800, dated April 30, from Bear Co. on account

    Dr  Note receivable $4,800

    Cr  Sales $4,800 (if the sale has just been made)

    or

    Cr  AR $4,800 (if transferring from AR to note receivable)

    May 10 Discounted the note dated April 30 at Third National Bank at a discount rate of 10%.

    The maturity value of the note is = Principal + interest = $4,800 + ($4,800 x 10% x 90/365) = $4,800 + $118.36 = $4,918.36.

    After 10 days, the company has earned interest revenue of $4,800 x 10% x 10/365 = $13.15.

    Since the note's due date is 80 days away, the bank's discount is $107.80*. The bank subtracts the discount from the note's maturity value and pays the company $4,810.56 for the note.

    *Discount = Maturity value x bank rate x time period

    = $4,918.36 x 10% x 80/365 = $107.80

    Dr  Cash $4,810.56

    Dr  Interest expense $2.59

    Cr  Note receivable $4,800

    Cr  Interest revenue $13.15

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