On November 1, 2015, Sokos Inc. accepted a three-month, 6%, $40,000 note from Malmo Inc. in settlement

Question:

On November 1, 2015, Sokos Inc. accepted a three-month, 6%, $40,000 note from Malmo Inc. in settlement of its account. Interest is due on the first day of each month, starting December 1. Both companies' year ends are December 31.

Instructions

(a) Prepare all journal entries for Sokos over the term of the note. Assume that the note is collected in full on the maturity date.

(b) Prepare all journal entries for Malmo over the term of the note. Assume that the note is paid in full on the maturity date.

(c) Assume that instead of honouring the note at maturity, Malmo dishonours it. Prepare the necessary journal entry on Sokos's books at the maturity date, February 1, 2016, assuming that eventual collection of the note is (1) expected, and (2) not expected. Interest was last paid by Malmo on January 1.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

Question Posted: