Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 8

Recording Notes Receivable Transactions
Jung Newbicalm Advertising (JNA) recently hired a new creative director, Howard Rachell, for its Madison Avenue office in New York. To persuade Howard to move from San Francisco, JNA agreed to advance him $103,000 on April 30, 2012, on a one-year, 10 percent note, with interest payments required on October 31, 2012, and April 30, 2013. JNA issues quarterly financial statements on March 31, June 30, September 30, and December 31.
Required:
1. Prepare the journal entry that JNA will make to record the promissory note created on April 30, 2012.
TIP: See Demonstration Case B for a similar problem.
2. Prepare the journal entries that JNA will make to record the interest accruals at each quarter end and interest payments at each payment date.
TIP: Interest receivable will be accrued at the end of each quarter, and then will be reduced when the interest payment is received.
3. Prepare the journal entry that JNA will make to record the principal payment at the maturity date.