Question

Daw Company’s December 31 year-end unadjusted trial balance shows a $10,000 balance in Notes Receivable. This balance is from one 6% note dated December 1, with a period of 45 days. Prepare any necessary journal entries for December 31 and for the note’s maturity date assuming it is honored.

Short answer

A trial balance is the type of account that is prepared after the ledger books of each account have been prepared to measure the equality of debit and credit balances of the organization.

Step-by-step solution

Journal entry

Date	Particulars	Debit	Credit
December 31	Interest receivables	$50
	Interest revenue		$50
	(To record the interest)
January 15	Cash	$10,075
	Interest receivables		$50
	Interest revenue		$25
	Notes receivables		$10,000
	(To record the cash received)

Working notes

$\begin{array}{rcl}\mathrm{Interest}\mathrm{receivables}& =& \mathrm{Amount}\mathrm{of}\mathrm{notes}\times \mathrm{Rate}\mathrm{of}\mathrm{interest}\times \frac{\mathrm{Number}\mathrm{of}\mathrm{days}}{360}\\ & =& \$10,000\times \frac{6}{100}\times \frac{30}{360}\\ & =& \$50\end{array}$