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On July 1, a one-year note for $120,000 was accepted in exchange for an unpaid accounts receivable for $120,000. Interest for 5% would be payable
- On July 1, a one-year note for $120,000 was accepted in exchange for an unpaid accounts receivable for $120,000. Interest for 5% would be payable at maturity.
- On July 1, a one-year non-interest-bearing note for $110,250 was accepted in exchange for an unpaid accounts receivable for $105,000. The market rate of interest at that time was 5%.
- On July 1, a one-year 10% note for $115,000 was accepted in exchange for unpaid accounts receivable $104,545 from a higher-risk customer. The customers borrowing interest rate at that time was 10%.
Required:
- Prepare the entries to recognize the notes payable and accrued interest, if any. The year-end is December 31.
- Assume that for item (iii) above, the borrower faces financial difficulties and can only pay 75% of the notes maturity amount. After a thorough analysis, the creditor determines that the 25% remaining is uncollectible. Prepare the entry for the note at maturity.
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